`UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-K

                        FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

     (Mark One)

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

            For the fiscal year ended December 31, 2004
                                      -----------------

                                       OR
[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

            For the transition period from        to
                                           ------    ------

            Commission file number 01-21617
                                   --------

                             THE QUIGLEY CORPORATION
                             -----------------------
             (Exact Name of Registrant as Specified in Its Charter)

          NEVADA                                                23-2577138
          ------                                                ----------
(State or Other Jurisdiction                                 (I.R.S. Employer
of Incorporation or Organization)                            Identification No.)


KELLS BUILDING, 621 SHADY RETREAT ROAD, P.O. BOX 1349, DOYLESTOWN, PA     18901
---------------------------------------------------------------------  ---------
(Address of Principal Executive Offices)                              (Zip Code)

Registrant's telephone number, including area code (215) 345-0919
                                                   --------------

Securities registered pursuant to Section 12(b) of the Act:  None
                                                             ----

Securities registered pursuant to Section 12(g) of the Act:


                    COMMON STOCK, $.0005 PAR VALUE PER SHARE
                    ----------------------------------------
                                (Title of Class)


                          COMMON SHARE PURCHASE RIGHTS
                          ----------------------------
                                (Title of Class)

Indicate  by check  mark  whether  the  registrant:  (1) has filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Exchange Act Rule 12b-2). Yes [ ] No [X]

The  aggregate   market  value  of  the   registrant's   common  stock  held  by
non-affiliates  was $74,708,630 as of June 30, 2004,  based on the closing price
of the common stock on The Nasdaq National Market.

Number of shares of each of the registrant's  classes of securities  outstanding
on March 23, 2005:

            Common stock, $.0005 par value per share:       11,659,655.
            Common share purchase rights:   0

                       DOCUMENTS INCORPORATED BY REFERENCE

Information  set forth in Part III of this report is  incorporated  by reference
from  the   registrant's   proxy  statement  for  the  2005  annual  meeting  of
stockholders.

                                  Page 1 of 34




                                TABLE OF CONTENTS


Part I                                                                     Page
                                                                          ------
  Item   1.  Business                                                     3 - 10

         2.  Properties                                                       10

         3.  Legal Proceedings                                           10 - 13

         4.  Submission of Matters to a Vote of Security Holders              13

Part II

         5.  Market for Registrant's Common Equity, Related Stockholder
              Matters and Issuer Purchases of Equity Securities          13 - 14

         6.  Selected Financial Data                                          15

         7.  Management's Discussion and Analysis of Financial Condition
              and Results of Operations                                  16 - 22

         7A. Quantitative and Qualitative Disclosures About Market Risk       22

         8.  Financial Statements and Supplementary Data                      23

         9.  Change  in and  Disagreements with Accountants on
              Accounting and Financial Disclosure                             24

         9A. Controls and Procedures                                          24

         9B. Other Information                                                24

Part III

         10. Directors and Executive Officers of the Registrant               24

         11. Executive Compensation                                           24

         12. Security Ownership of Certain Beneficial Owners and
              Management and Related Stockholder Matters                      24

         13. Certain Relationships and Related Transactions                   24

         14. Principal Accountant Fees and Services                           25

Part IV
         15. Exhibits and Financial Statement Schedules                  25 - 27


Signatures                                                                    28


                                       -2-




FORWARD-LOOKING STATEMENTS

In addition to  historical  information,  this Report  contains  forward-looking
statements.  These  forward-looking  statements are subject to certain risks and
uncertainties  that could cause actual results to differ  materially  from those
reflected in these forward-looking  statements.  Factors that might cause such a
difference include,  but are not limited to, management of growth,  competition,
pricing  pressures  on the  Company's  products,  industry  growth  and  general
economic conditions.  Readers are cautioned not to place undue reliance on these
forward-looking  statements,  which reflect management's opinions only as of the
date hereof.  The Company undertakes no obligation to revise or publicly release
the results of any revision to these forward-looking statements.

CERTAIN RISK FACTORS

The Quigley  Corporation makes no representation that the United States Food and
Drug Administration or any other regulatory agency will grant an Investigational
New Drug or take any other  action to allow its  formulations  to be  studied or
marketed. Furthermore, no claim is made that potential medicine discussed herein
is  safe,   effective,   or  approved  by  the  Food  and  Drug  Administration.
Additionally,  data that demonstrates activity or effectiveness in animals or in
vitro  tests do not  necessarily  mean the  formula  test  compound,  referenced
herein,  will be effective in humans.  Safety and  effectiveness  in humans will
have to be  demonstrated  by means of  adequate  and  well  controlled  clinical
studies before the clinical  significance of the formula test compound is known.
Readers should carefully review the risk factors  described in other sections of
the filing as well as in other  documents  the  Company  files from time to time
with the Securities and Exchange Commission.

                                     PART I

ITEM 1.     BUSINESS

BUSINESS DEVELOPMENT

The  Quigley  Corporation  (WWW.QUIGLEYCO.COM,  hereinafter  referred  to as the
"Company")  is a Nevada  corporation  which was organized on August 24, 1989 and
commenced business operations in October 1989.

The  Company's  business is the  manufacture  and  distribution  of  cold remedy
products to the consumer through the over-the-counter  marketplace together with
the sale of proprietary  health and wellness products through its direct selling
subsidiary.  One of the  Company's  key  products of its cold remedy  segment is
Cold-Eeze(R),  a zinc  gluconate  glycine  product,  proven in two  double-blind
clinical studies to reduce the duration and severity of the common cold symptoms
by nearly half.  Cold-Eeze(R)  is now an established  product in the health care
and  cold-remedy  market.  Prior  to  October  1,  2004,  the  lozenge  form  of
Cold-Eeze(R)  was  manufactured  by  JoEl,  Inc,  then  the  Company's  contract
manufacturer  for this product.  On October 1, 2004,  the Company  completed the
purchase  of certain  assets and  assumed  certain  liabilities  of JoEl,  Inc.,
assuring future  manufacturing  capability  necessary to support the business of
the  cold  remedy  segment.   This  manufacturing  entity,  now  called  Quigley
Manufacturing  Inc.  ("QMI"),  a wholly owned  subsidiary  of the Company,  will
continue to produce lozenge product along with performing such operational tasks
as warehousing and shipping the Company's  Cold-Eeze(R)  products.  In addition,
QMI  produces  a  variety  of hard and  organic  candy  for sale to third  party
customers  in addition  to contract  manufacturing  activities  for  non-related
entities. (See Note 3 for further information on this asset acquisition).

Darius International Inc. ("Darius"),  the Health and Wellness segment, a wholly
owned  subsidiary  of the Company,  was formed in January 2000 to introduce  new
products  to the  marketplace  through a network  of  independent  distributors.
Darius is a direct selling  organization  specializing in proprietary health and
wellness  products,  which commenced  shipping product to customers in the third
quarter of 2000. On January 2, 2001,  the Company  acquired  certain  assets and
assumed certain  liabilities of a privately held company  involved in the direct
marketing and distribution of health and wellness products.

The formation of Darius has provided  diversification to the Company in both the
method of product  distribution  and the broader range of products  available to
the  marketplace,  serving as a balance to the  seasonal  revenue  cycles of the
Cold-Eeze(R) branded products.

In January 2001,  the Company  formed an Ethical  Pharmaceutical  Unit,  Quigley
Pharma Inc. ("Pharma"),  the Ethical  Pharmaceutical  segment, that is under the
direction of its Executive Vice President and Chairman of its Medical Advisory


                                       -3-




Committee.  The  formation of Pharma  followed  the Patent  Office of the United
States Commerce Department's  confirmation of the assignment to the Company of a
Patent  Application for the "Method and Composition for the Topical Treatment of
Diabetic  Neuropathy"  which was issued and extends  through March 27, 2021. The
establishment of a dedicated pharmaceutical subsidiary may enable the Company to
diversify  into the  prescription  drug market and to ensure safe and  effective
distribution  of  these  important   potential  new  products   currently  under
development.  At this time,  five  patents  have been issued and assigned to the
Company resulting from research activity of Pharma.

During 2000, the Company acquired a 60% ownership  position in Caribbean Pacific
Natural  Products,  Inc.  ("CPNP"),  a developer  and  marketer  of  all-natural
sun-care and  skincare  products for luxury  resorts,  theme parks and spas.  In
December  2002,  the Board of Directors  of the Company  approved a plan to sell
CPNP. On January 22, 2003,  the Company  completed the sale of the Company's 60%
equity interest in CPNP to Suncoast Naturals,  Inc.  ("Suncoast").  See Note 5 -
Discontinued Operations.

DESCRIPTION OF BUSINESS OPERATIONS

Since  its  inception,  the  Company  has  continued  to  conduct  research  and
development   into  various  types  of   health-related   food  supplements  and
homeopathic cold remedies.  Initially,  the Company's business was the marketing
and  distribution  of a  line  of  nutritious  health  supplements  (hereinafter
"Nutri-Bars"). During 1995, the Company reduced the emphasis in the marketing of
the Nutri-Bars and commenced focusing its marketing and research and development
resources  towards the Company's  patented  Cold-Eeze(R)  zinc gluconate glycine
cold relief products.

Prior to the fourth  quarter  1996,  the Company had minimal  revenues  and as a
result  suffered  continued  losses due to ongoing  research and development and
operating expenses. However, 1997 resulted in significant revenue increases as a
result of the Company's  nationwide  marketing campaign and the increased public
awareness through media public service announcements of the Cold-Eeze(R) lozenge
product.

Since  June  1996,  the  cold-remedy   segment  has  concentrated  its  business
operations on the  manufacturing,  marketing and  development of its proprietary
Cold-Eeze(R)  cold-remedy lozenge products and on development of various product
extensions.  These products are based upon a proprietary zinc gluconate  glycine
formula,  which in two  double-blind  clinical  studies  has shown to reduce the
duration  and  severity of the common  cold  symptoms.  The Quigley  Corporation
acquired worldwide  manufacturing and distribution rights to this formulation in
1992 and  commenced  national  marketing in 1996.  The demand for the  Company's
cold-remedy products is seasonal,  where the third and fourth quarters generally
represent the largest sales volume.  Prior to October 1, 2004,  the lozenge form
of  Cold-Eeze(R)  was  manufactured by JoEl, Inc. On October 1, 2004 the Company
completed  the purchase of certain  assets and assumed  certain  liabilities  of
JoEl, Inc., assuring a future manufacturing  capability necessary to support the
business of the cold remedy segment. (see Note 3 for further information on this
net asset acquisition).

Darius is a direct selling  organization  specializing in proprietary health and
wellness  products,  which commenced  shipping product to customers in the third
quarter of 2000.

Pharma was formed for the purpose of developing  naturally derived  prescription
drugs, cosmeceuticals,  and dietary supplements.  Pharma is currently undergoing
research and development  activity in compliance  with regulatory  requirements.
The Company is in the initial stages of what may be a lengthy process to develop
these patent applications into commercial products.

During 2004,  approximately 93% of the Company's  revenues were generated in the
United States with the remainder being attributable to international trade.

Financial information regarding the Company's operating segments is set forth in
Item 8, Notes to Financial Statements, Note 17 - Segment Information.

PRODUCTS

COLD-REMEDY PRODUCTS

Cold-Eeze(R),   a  zinc  gluconate  glycine   formulation   (ZIGG(TM)),   is  an
over-the-counter  consumer  product  used to reduce the duration and severity of
the common  cold and is  currently  sold in lozenge,  sugar-free  tablet and gum
form.   During  2003,  the  Company  launched   Cold-Eeze(R)   Nasal  Spray  and
Kidz-EEZE(TM)  Sore Throat Pops.  In September  2004,  the Company  notified its
customers  of its decision to  discontinue  the  Cold-Eeze(R)  Cold Remedy Nasal
Spray  product  within  its  line of cold remedy products. The decision was made


                                       -4-




because  the product had not  developed  into a viable  entry in the nasal spray
cold remedy  category.  Since its launch in September  2003, the product had not
met  either  the  Company's  sales  expectations  or its  return  on  investment
projections.

In May 1992,  the Company  entered into an  exclusive  agreement  for  worldwide
representation,  manufacturing, marketing of Cold-Eeze(R) products in the United
States.  A  randomized  double-blind   placebo-controlled  study,  conducted  at
Dartmouth College of Health Science, Hanover, New Hampshire,  concluded that the
lozenge  formulation  treatment,  initiated  within 48 hours of  symptom  onset,
resulted in a significant reduction in the total duration of the common cold.

On May 22, 1992,  "ZINC AND THE COMMON COLD, A CONTROLLED  CLINICAL  STUDY," was
published in England in the "Journal of International  Medical Research," Volume
20, Number 3, Pages 234-246. According to this publication,  (a) flavorings used
in  other  Zinc  lozenge  products  (citrate,   tartrate,   separate,   orotate,
picolinate,  mannitol or sorbitol)  render the Zinc inactive and  unavailable to
the patient's  nasal  passages,  mouth and throat where cold symptoms have to be
treated, (b) this patented formulation delivers  approximately 93% of the active
Zinc to the  mucosal  surfaces  and (c) the  patient  has the same  sequence  of
symptoms  as in the  absence  of  treatment  but goes  through  the phases at an
accelerated rate and with reduced symptom severity.

On July 15, 1996,  results of a new randomized  double-blind  placebo-controlled
study on the common cold, which commenced at the CLEVELAND CLINIC  FOUNDATION on
October 3, 1994, were published.  The study called "ZINC GLUCONATE  LOZENGES FOR
TREATING THE COMMON COLD" was  completed and published in THE ANNALS OF INTERNAL
MEDICINE - VOL. 125 NO. 2. Using a 13.3mg  lozenge  (almost half the strength of
the  lozenge  used in the  Dartmouth  Study),  the  result  still  showed  a 42%
reduction in the duration of common cold symptoms.

In April 2002, the Company announced the statistical  results of a retrospective
clinical  adolescent  study at the Heritage School facility in Provo,  Utah that
suggests that  Cold-Eeze(R)  is also an effective means of preventing the common
cold and statistically (a) lessens the number of colds an individual suffers per
year,  reducing  the  median  from  1.5 to  zero  and  (b)  reduces  the  use of
antibiotics  for respiratory  illnesses from 39.3% to 3.0% when  Cold-Eeze(R) is
administered as a first line treatment approach to the common cold.

In April 2002,  the Company was  assigned a Patent  Application  which was filed
with the Patent Office of the United States  Commerce  Department for the use of
Cold-Eeze(R) as a prophylactic for cold prevention.  The new patent  application
follows the results of the adolescent study at the Heritage School facility.

In May  2003,  the  Company  announced  the  findings  of a  prospective  study,
conducted at the Heritage School facility in Provo, Utah, in which 178 children,
ages 12 to 18 years, were given Cold-Eeze(R)  lozenges both  symptomatically and
prophylactically  from  October 5, 2001 to May 30,  2002.  The study found a 54%
reduction in the most  frequently  observed cold  duration.  Those  subjects not
receiving  treatment most  frequently  experienced  symptom  duration of 11 days
compared with 5 days when Cold-Eeze(R)  lozenges were administered,  a reduction
of 6 days.

The business of the Company is subject to federal and state laws and regulations
adopted  for  the  health  and  safety  of  users  of  the  Company's  products.
Cold-Eeze(R)  is a homeopathic  remedy that is subject to regulations by various
federal,  state and local  agencies,  including  the United States Food and Drug
Administration ("FDA") and the Homeopathic Pharmacopoeia of the United States.

HEALTH AND WELLNESS

Darius,  through  Innerlight  Inc.,  its wholly  owned  subsidiary,  is a direct
selling company  specializing in the development and distribution of proprietary
health and wellness products,  including herbal vitamins and dietary supplements
for the human condition, primarily within the United States and since the second
quarter of 2003,  internationally.  During the  fourth  quarter of 2004,  Darius
launched an  exclusive  skin care line under the Beverly  Sassoon  brand name to
diversify this segment's product range.

The continued  success of this segment is dependent,  among other things, on the
Company's ability:

          o    To  maintain  existing  independent  representatives  and recruit
               additional successful independent representatives.  Additionally,
               the loss of key high-level  distributors  could negatively impact
               future growth and revenues;

          o    To  continue  to develop  and make  available  new and  desirable
               products at an acceptable cost;


                                       -5-




          o    To  maintain  safe and  reliable  multiple-location  sources  for
               product and materials;

          o    To maintain a reliable information technology system and internet
               capability.  The Company has  expended  significant  resources on
               systems  enhancements  in the past and will  continue to do so to
               ensure prompt customer  response times,  business  continuity and
               reliable  reporting  capabilities.  Any  interruption to computer
               systems  for an  extended  period of time could be harmful to the
               business;

          o    To  execute  conformity  with  various  federal,  state and local
               regulatory  agencies  both  within the United  States and abroad.
               With the  growth of  international  business,  difficulties  with
               foreign regulatory requirements could have a significant negative
               impact  on  future   growth.   Any  inquiries   from   government
               authorities  relating to the  Company's  business and  compliance
               with laws and regulations could be harmful to the Company;

          o    To compete with larger more mature organizations operating within
               the same  market  and to remain  competitive  in terms of product
               relevance and business opportunity;

          o    To  successfully  implement  methods for  progressing  the direct
               selling philosophy internationally; and

          o    To plan strategically for general economic conditions.

Any or all of the above risks could result in significant reductions in revenues
and profitability of the Health and Wellness segment.

CONTRACT MANUFACTURING

On October 1, 2004, the Company  purchased  certain  assets and assumed  certain
liabilities of JoEl, Inc. Prior to October 1, 2004, JoEl, Inc., was the contract
manufacturer  to the Company for the  Cold-Eeze(R)  lozenge form of the product.
From  October  1,  2004,   this   manufacturing   entity,   now  called  Quigley
Manufacturing  Inc.  ("QMI"),  a wholly owned  subsidiary  of the  Company,  has
continued to produce  lozenge  product along with  performing  such  operational
tasks as  warehousing  and  shipping the  Company's  Cold-Eeze(R)  products.  In
addition to that function,  QMI produces a variety of hard and organic candy for
sale to third party customers in addition to contract  manufacturing  activities
for non-related entities.

ETHICAL PHARMACEUTICAL

Pharma's current activity is the development of  naturally-derived  prescription
drugs with the goal to improve  the  quality of life and health of those in need
through scientific research and development. Research and development will focus
on the identification,  isolation and direct use of active medicinal substances.
One aspect of Pharma's research will focus on the combination of isolated active
constituents and whole plant  components.  The search for new natural sources of
medicinal  substances  will  focus not only on world  plants,  fungi,  and other
natural substances, but an intense investigation into traditional medicinals and
historic therapeutics.

The  pre-clinical  development,   clinical  trials,  product  manufacturing  and
marketing  of Pharma's  potential  new products are subject to federal and state
regulation in the United States and other  countries.  Obtaining FDA  regulatory
approval for these pharmaceutical products can require substantial resources and
take several years.  The length of this process depends on the type,  complexity
and novelty of the product and the nature of the disease or other indications to
be  treated.  If the  Company  cannot  obtain  regulatory  approval of these new
products in a timely  manner or if the patents are not granted or if the patents
are subsequently challenged,  these possible events could have a material effect
on the business  and  financial  condition  of the Company.  The strength of the
Company's patent position may be important to its long-term  success.  There can
be no assurance  that these  patents and patent  applications  will  effectively
protect the Company's products from duplication by others.

The areas of focus are:

          o    A Patent (No.  6,555,573 B2) entitled "Method and Composition for
               the Topical Treatment of Diabetic Neuropathy." The patent extends
               through March 27, 2021.

          o    A Patent (No. 6,592,896 B2) entitled  "Medicinal  Composition and
               Method  of Using  It" (for  Treatment  of  Sialorrhea  and  other
               Disorders)  for a product to  relieve  sialorrhea  (drooling)  in
               patients  suffering from  Amyotrophic  Lateral  Sclerosis  (ALS),
               otherwise  known as Lou  Gehrig's  Disease.  The  patent  extends
               through August 6, 2021.


                                      -6-




          o    A Patent (No. 6,596,313 B2) entitled "Nutritional  Supplement and
               Method  of  Using  It"  for  a  product  to  relieve   sialorrhea
               (drooling)  in  patients   suffering  from  Amyotrophic   Lateral
               Sclerosis  (ALS),  otherwise known as Lou Gehrig's  Disease.  The
               patent extends through April 15, 2022.

          o    A Patent (No. 6,753,325 B2) entitled  "Composition and Method for
               Prevention,  Reduction and Treatment of Radiation  Dermatitis," a
               composition  for  preventing,   reducing  or  treating  radiation
               dermatitis. The patent extends through November 5, 2021.

          o    A Patent (No. 6,827,945 B2) entitled "Nutritional  Supplement and
               Method  of  Using  It" for a method  for  treating  at least  one
               symptom of arthritis. The patent extends through April 22, 2023.

          o    In September 2002, the Company filed a foreign patent application
               entitled  "Method and  Composition  for the Topical  Treatment of
               Diabetic Neuropathy" in Europe and other foreign markets.

In April 2002, the Company initiated a Phase II Proof of Concept Study in France
for  treatment of diabetic  neuropathy,  which was  concluded in 2003.  In April
2003, the Company  announced  that an  independently  monitored  analysis of the
Phase II Proof of Concept Study  concluded that subjects using this  formulation
had 67% of their  symptoms  improve,  suggesting  efficacy.  In March 2004,  the
Company  announced  that it had  completed its first meeting at the FDA prior to
submitting the Company's  Investigational  New Drug ("IND")  application for the
relief of symptoms  of diabetic  symmetrical  peripheral  neuropathy.  The FDA's
pre-IND meeting  programs are designed to provide sponsors with advance guidance
and input on drug development programs.

In September 2003, the Company announced its intention to file for permission to
study its  patent  pending  potential  treatment  for  psoriasis  and other skin
disorders.  Continued  testing will therefore have to be conducted  under an IND
application following positive preliminary results.

In December 2003, the Company  announced  positive test results of a preliminary
independent  in vitro  study  indicating  that a test  compound  of the  Company
previously tested on the Influenza virus showed "significant  virucidal activity
against a strain of the Severe  Acute  Respiratory  Syndrome  (SARS)  virus." In
January  2004 the  Company  announced  that it intends to  conduct  two  further
studies. The first study is intended to repeat the previously announced results,
which  demonstrated  the  compound to be 100  percent  effective  in  preventing
non-infected  ferrets in close  proximity  to an infected  ferret from  becoming
infected with the Influenza A virus. The second study is a dose ranging study on
the test compound.  Upon dosage determination and confirmation results from this
forthcoming  animal  model study,  a human proof of concept  study using a virus
challenge with  Influenza A virus in a quarantine  unit can be the next step. In
January 2004,  the Company also  reported that its compound has shown  virucidal
and  virustatic  activity  against  the strain 3B of the Human  Immunodeficiency
Virus Type 1 (HIV-1) in an in-vitro study.

In January 2004, a broad  anti-viral  compound was determined to be effective in
in-vitro and in-vivo studies for  applications  such as Influenza A&B, SARS, and
Herpes Simplex 1, and since this Sialorrhea formulation is a derivative compound
of the anti-viral  formulation,  ongoing testing for this Sialorrhea compound is
being reconsidered and probably will be discontinued.

In April 2004, the Company announced the results of a preliminary,  pre-clinical
animal study which  measured the effect of its  proprietary  patent  applied for
formulation  against ionizing  (nuclear)  radiation.  This study determined that
parenteral  (injection)  administration  of the study  compound  was  protective
against the effects of a lethal,  whole body ionizing  radiation dose in a mouse
model. This compound is being  investigated to potentially reduce the effects of
radiation exposure on humans.

PATENTS, TRADEMARKS, ROYALTY AND COMMISSION AGREEMENTS

The Company  currently owns no patents for cold-remedy  products.  However,  the
Company has been assigned patent  applications  which are hereinafter  discussed
and has been  granted  an  exclusive  agreement  for  worldwide  representation,
manufacturing,  marketing and  distribution  rights to a zinc gluconate  glycine
lozenge formulation, which are patented as follows:

United States:  No. 4 684 528 (August 4, 1987, expired August 2004)   Sweden: No. 0 183 840 (March 2, 1994)
                No. 4 758 439 (July 19, 1988)                         Canada:  No. 1 243 952 (November 1, 1988)
Great Britain:  No. 2 179 536 (December 21, 1988)                     Germany: No. 3,587,766 (March 2, 1994)
France & Italy: No. EP 0 183 840 B1 (March 2, 1994)                   Japan:     Pending


                                       -7-




The  following  patents have been assigned to the Company in relation to Pharma,
together with issue date:

United States:  No. 6 555 573 B2 (April 29, 2003)
                No. 6 592 896 B2 (July 15, 2003)
                No. 6 596 313 B2 (July 22, 2003)
                No. 6 753 325 B2 (June 22, 2004)
                No. 6 827 945 B2 (December 7, 2004)

In 1996, the Company also acquired an exclusive license for a United States ZINC
GLUCONATE  USE PATENT NUMBER RI 33,465 from the patent  holder.  This use patent
gives the Company  exclusive  rights to both the use and formulation  patents on
zinc  gluconate for reducing the duration and severity of common cold  symptoms.
Pursuant  to the  License  Agreement  entered  into  between the Company and the
patent  holder,  the Company  paid a royalty  fee to the patent  holder of three
percent  (3%) on sales  collected,  less  certain  deductions.  This  patent and
exclusive  license  expired in March 2002.  The Company does not  anticipate any
material impact on the financial statements from the expiration of the patent.

The  Cold-Eeze(R)  products are marketed by the Company in  accordance  with the
terms of a licensing  agreement  (between  the Company and the  developer).  The
contract is assignable by the Company with the  developer's  consent.  In return
for  exclusive  distribution  rights,  the Company  must pay the  developer a 3%
royalty  and  a 2%  consulting  fee  based  on  sales  collected,  less  certain
deductions,  throughout  the term of this  agreement,  which is due to expire in
2007.  However,  the Company and the developer are in litigation  and as such no
potential offset from such litigation for these fees has been recorded.

During 1997,  the Company  obtained a trademark for the major  components of its
lozenge,  ZIGG(TM) (denoting zinc gluconate glycine),  to set Cold-Eeze(R) apart
from the imitations proliferating the marketplace.

An  agreement  between the Company and its  founders was entered into on June 1,
1995.  The  founders,   both  officers  and  stockholders  of  the  Company,  in
consideration of the acquisition of the Cold-Eeze(R)  cold therapy product,  are
to receive a total  commission of five percent (5%),  on sales  collected,  less
certain deductions until the expiration of this agreement on May 31, 2005.

In August 2003,  the Company  entered into a licensing  agreement  with a patent
holder  relating to the utilization of a nasal spray product in the treatment of
symptoms of the common cold.  The Company  agreed to pay the patent holder a two
percent royalty on net sales of nasal spray products,  less certain  deductions,
throughout the term of this agreement, expiring no later than April 2014. As the
nasal  spray  product  has now been  discontinued,  no further  obligations  are
expected to materialize in relation to this agreement.

During 2004 the  following  patents were granted to the Company  relating to the
areas of focus of Pharma:

          o    A Patent (No. 6,753,325 B2) entitled  "Composition and Method for
               Prevention,  Reduction and Treatment of Radiation  Dermatitis," a
               composition  for  preventing,   reducing  or  treating  radiation
               dermatitis. The patent extends through November 5, 2021.

          o    A Patent (No. 6,827,945 B2) entitled "Nutritional  Supplement and
               Method  of  Using  It" for a method  for  treating  at least  one
               symptom of arthritis. The patent extends through April 22, 2023.

PRODUCT DISTRIBUTION AND CUSTOMERS

The Company has several Broker, Distributor and Representative Agreements,  both
nationally and internationally,  which provide for commission compensation based
on sales performance.

The Cold-Eeze(R)  products are distributed through numerous food, chain drug and
mass merchandisers  throughout the United States, including Walgreen Co., Ahold,
Albertsons, CVS, RiteAid, Publix, Brooks Drug, B.J's Wholesale Club, Inc., Sam's
Club,  Winn-Dixie Stores,  Inc., Wal-Mart,  Target, The Kroger Company,  Safeway
Inc., Costco Wholesale, Kmart Corporation, and wholesale distributors including,
AmerisourceBergen and Cardinal Distribution.

The  Company is not  dependent  on any  single  customer  as the broad  range of
customers includes many large wholesalers, mass merchandisers,  and multi-outlet
pharmacy  chains,  five of which account for a  significant  percentage of sales
volume. The top five customers of the Company represent 27%, 23%, and 23% of its
continuing  consolidated  gross  revenues for the years ended December 31, 2004,
2003 and 2002, respectively.


                                       -8-




Darius is a direct selling  organization  specializing in proprietary health and
wellness  products  and the  introduction  of new  products  to the  marketplace
through a network of independent distributors. This method of distribution is in
contrast to traditional  distribution  channels using independent and chain drug
and  discount  stores  as  utilized  by  the  Company  in the  promotion  of the
cold-remedy products.

Pharma  currently has no sales since it is undergoing  research and  development
activity in compliance with regulatory requirements and is at the initial stages
of what may be a lengthy process to develop commercial products.

RESEARCH AND DEVELOPMENT

The Company's  research and  development  costs for the years ended December 31,
2004, 2003 and 2002 were  $3,232,569,  $3,365,698 and $2,663,291,  respectively.
Future research and development expenditures are anticipated in order to develop
extensions  of the  Cold-Eeze(R)  product,  including  potential  unrelated  new
products in the consumer health care industry,  that are primarily  supported by
clinical studies,  for efficacious  long-term  products that can be coupled with
possible line extension  derivatives for a family of products.  Clinical studies
and testing are anticipated in connection  with Pharma,  such as the formulation
of products for diabetic use, radiation  dermatitis,  influenza A, arthritis and
other disorders.  Pharma is currently  involved in research  activity  following
patent applications that the Company has acquired,  and research and development
costs,  relating to potential products,  are expected to increase  significantly
over time as product research and testing continues.

REGULATORY MATTERS

The business of the Company is subject to federal and state laws and regulations
adopted  for the  health  and  safety of users of the  Company's  products.  The
Company's  Cold-Eeze(R)  product is a  homeopathic  remedy,  which is subject to
regulation by various federal,  state and local agencies,  including the FDA and
the Homeopathic Pharmacopoeia of the United States. These regulatory authorities
have broad  powers,  and the Company is subject to  regulatory  and  legislative
changes that can affect the  economics  of the industry by requiring  changes in
operating  practices  or by  influencing  the  demand  for,  and the  costs  of,
providing  its products.  Management  believes that the Company is in compliance
with all such laws,  regulations and standards currently in effect including the
Food,  Drug  and  Cosmetics  Act  of  1938  and  the  Homeopathic  Pharmacopoeia
Regulatory  Service.  Although it is possible that future  results of operations
could be  materially  affected  by the future  costs of  compliance,  management
believes  that the future costs will not have a material  adverse  effect on the
Company's financial position or competitive position.

The  pre-clinical  development,   clinical  trials,  product  manufacturing  and
marketing  of Pharma's  potential  new products are subject to federal and state
regulation in the United States and other  countries.  Obtaining FDA  regulatory
approval for these pharmaceutical products can require substantial resources and
take several years.  The length of this process depends on the type,  complexity
and novelty of the product and the nature of the disease or other indications to
be  treated.  If the  Company  cannot  obtain  regulatory  approval of these new
products in a timely  manner or if the patents are not granted or if the patents
are  subsequently  challenged,  these possible  events could all have a material
effect on the business and financial  condition of the Company.  The strength of
the Company's patent position may be important to its long-term  success.  There
can be no assurance that these patents and patent  applications will effectively
protect the Company's products from duplication by others.

COMPETITION

The Company competes with other suppliers of cold-remedy and health and wellness
products.   These  suppliers  range  widely  in  size.  Some  of  the  Company's
competitors  have  significantly  greater  financial,   technical  or  marketing
resources than the Company.  Management believes that its Cold-Eeze(R)  product,
which has been  clinically  proven in two  double-blind  studies  to reduce  the
severity and duration of common cold  symptoms,  offers a significant  advantage
over  many  of its  competitors  in  the  over-the-counter  cold-remedy  market.
Management further believes that Darius' direct marketing  distribution  methods
offer a significant advantage over many of its competitors. The Company believes
that its  ability to compete  depends on a number of factors,  including  price,
product quality,  availability and reliability,  credit terms, name recognition,
delivery time and post-sale service and support.  On October 1, 2004 the Company
acquired certain assets and assumed certain liabilities of JoEl, Inc., the prior
contract  manufacturer of the Cold-Eeze(R) lozenge product. This new subsidiary,
Quigley Manfacturing Inc., assures future production capabilities of the lozenge
product which constitutes primarily all of the cold remedy revenue.


                                       -9-




EMPLOYEES

At December 31, 2004 the Company employed 131 full-time persons, the majority of
which  were  employed  at  the   Company's   manufacturing   facility,   Quigley
Manufacturing Inc., in a production function.  The remainder were involved in an
executive, marketing or administrative capacity. None of the Company's employees
are covered by a collective bargaining agreement or are members of a union.

SUPPLIERS

Prior to October 1, 2004, the lozenge form of Cold-Eeze(R)  was  manufactured by
JoEl,  Inc. On October 1, 2004 the  Company  completed  the  purchase of certain
assets and assumed  certain  liabilities  of JoEl,  Inc.,  thereby  bringing the
manufacturing  process of the lozenge  product under the control of the Company.
The other forms of Cold-Eeze(R)  and remaining  products of both the cold remedy
and health  and  wellness  segments  continue  to be  manufactured  by  contract
manufacturers.  Should these third party relationships  terminate or discontinue
for any reason, the Company has formulated a contingency plan necessary in order
to  prevent  such  discontinuance   from  materially   affecting  the  Company's
operations.  Any such termination may,  however,  result in a temporary delay in
production  until  the  replacement  facility  is  able to  meet  the  Company's
production requirements.

Raw materials used in the production of the  cold-remedy  products are available
from numerous sources.  Currently,  they are being procured from a single vendor
in order to secure purchasing economies. In a situation where this one vendor is
not able to supply the  ingredients,  other  sources have been  identified.  Any
situation where the vendor is not able to supply the contract  manufacturer with
ingredients  may result in a temporary  delay in  production  until  replacement
supplies are obtained to meet the Company's production requirements.

ITEM 2.   PROPERTIES

The corporate office of The Quigley  Corporation is located at 621 Shady Retreat
Road,  Doylestown,  Pennsylvania.  This property,  with an area of approximately
13,000 square feet, was purchased in November 1998 and refurbished  during 1999.
The Company occupies  warehouse space in Las Vegas,  Nevada at a current monthly
cost of $2,396. This Nevada location has a three-year lease that expires in July
2006.  In  addition  to storage  facilities  at the  manufacturing  subsidiary's
locations,  the Company also stores product in a number of additional warehouses
in Pennsylvania  with storage charges based upon the quantities of product being
stored.

The manufacturing  facilities of Quigley  Manufacturing Inc. are located in each
of Elizabethtown and Lebanon, Pennsylvania. The facilities were purchased by The
Quigley  Corporation  effective  October  1,  2004  as  part  of  the  Company's
acquisition of certain assets and assuming certain  liabilities of JoEl, Inc. In
total,  the facilities  have a total area of  approximately  73,000 square feet,
combining both manufacturing and office space.

The Darius business in Utah is located at 867 East 2260 South, Provo, Utah, with
an area of  approximately  24,700 square feet. The current monthly lease cost of
this  office and  warehouse  space is  $10,694  with the leases set to expire in
September  2005 and July 2007,  respectively.  The  Company  expects  that these
leases will be renewed or that alternative spaces will be obtained.

The Company believes that its existing facilities are adequate at this time.

ITEM 3.  LEGAL PROCEEDINGS

                                TESAURO AND ELEY

In September  2000, the Company was sued by two  individuals  (Jason Tesauro and
Elizabeth Eley, both residents of Georgia), on behalf of a "nationwide class" of
" similarly situated  individuals," in the Court of Common Pleas of Philadelphia
County,  Pennsylvania.  The  Complaint  alleges  that the  Plaintiffs  purchased
certain Cold-Eeze(R)  products between August,  1996, and November,  1999, based
upon  cable  television,  radio  and  internet  advertisements  which  allegedly
misrepresented  the  qualities  and  benefits  of the  Company's  products.  The
Complaint   requests  an  unspecified   amount  of  damages  for  violations  of
Pennsylvania's   consumer   protection   law,  breach  of  warranty  and  unjust
enrichment, as well as a judicial determination that the action be maintained as
a class action.

In October  2000,  the Company  filed  Preliminary  Objections  to the Complaint
seeking dismissal of the action.  The Court sustained certain objections thereby
narrowing  Plaintiffs'  Complaint.  In May  2001,  Plaintiffs  filed a Motion to
Certify the Alleged Class. The Company opposed the Motion. In November 2001, the
Court held a hearing on Plaintiffs'


                                      -10-




Motion for Class  Certification.  In January 2002,  the Court denied in part and
granted in part the Plaintiffs'  Motion.  The Court denied Plaintiffs' Motion to
Certify a Class  based on  Plaintiffs'  claim  under the  Pennsylvania  Consumer
Protection  Law;  however,  the Court  certified the class based on  Plaintiffs'
breach of warranty and unjust enrichment claims

Discovery  has been  completed and trial that was  originally  scheduled for May
2004 has been continued pending  determination of certain dispositive  pre-trial
motions filed by the Company.

The  Corporation  believes  Defendant's  claims  are  without  merit,  and it is
vigorously  defending the claims.  Based upon the information the Company has at
this  time,  it  believes  the  action  will not have a  material  impact to the
Company. However, at this time no prediction as to the outcome can be made.

                          LITIGATION - FORMER EMPLOYEE

On April 12, 2002,  the Company  commenced a complaint in Equity in the Court of
Common  Pleas of Bucks  County,  PA  against  the  former  President  of  Darius
International Inc., its wholly owned subsidiary,  following  termination of such
President.  The allegations in the complaint include, but are not limited to, an
alleged  breach of fiduciary  duty owed to the  Company.  The Company is seeking
both  injunctive  and monetary  relief.  On or about May 1, 2002,  the defendant
filed a counterclaim  requesting  that the Court declare him the lawful owner of
55,000 stock options,  unspecified  damages  relating to an alleged breach of an
oral contract and for  commissions  allegedly  owed. In addition,  the Defendant
requests  the return of  certain  intellectual  property  used to  commence  and
continue Darius' operations.

The  Corporation  believes  Defendant's  claims  are  without  merit,  and it is
vigorously  defending the  counterclaims  and is  prosecuting  its action on its
complaint.  Based upon the information the Company has at this time, it believes
the action will not have a material impact to the Company. However, at this time
no prediction as to the outcome can be made.

                  PAIGE D. DAVISON VS. THE QUIGLEY CORPORATION

On  February  26,  2004,  the  plaintiff  filed an action  against  The  Quigley
Corporation  (the  "Company"),  which was not served  until  April 5, 2004.  The
action  alleges that the  plaintiff  suffered  certain  losses and injuries as a
result of using the Company's nasal spray product.  Among the allegations of the
plaintiff  are that the nasal spray was defective  and  unreasonably  dangerous,
lacked proper and adequate warnings and/or instructions, and was not fit for the
purposes and uses intended.

The Company has  investigated the claims and believes they are without merit. At
the  present  time,  the matter is being  defended  by the  Company's  liability
insurance carrier.

The Company  believes  plaintiff's  claims are without  merit and is  vigorously
defending those claims. Based upon the information the Company has at this time,
it believes the action will not have a material impact to the Company.  However,
at this time no prediction as to the outcome can be made.

                       POLSKI VS. THE QUIGLEY CORPORATION

On August 12, 2004, plaintiff filed an action against The Quigley Corporation in
the District Court for Hennepin  County,  Minnesota,  which was not served until
September 2, 2004. The action alleges that plaintiff suffered certain losses and
injuries as a result of the Company's nasal spray product. Among the allegations
of plaintiff are negligence,  products liability,  alleged breach of express and
implied  warranties,  and an  alleged  breach of the  Minnesota  Consumer  Fraud
Statute.

The  Company  has  investigated  the claims and  believes  that they are without
merit.  At the  present  time,  the matter is being  defended  by the  Company's
insurance carrier.

The Company  believes  plaintiff's  claims are without  merit and is  vigorously
defending those claims. Based upon the information the Company has at this time,
it believes the action will not have a material impact to the Company.  However,
at this time no prediction as to the outcome can be made.

      ANGELFIRE, ARVIN, BELL, BROWN, EDWARDS, HOHNSTEIN, HOFFMAN, LAURENT,
                   MARTIN, RICHARDSON, RIGSBY, SEONE, SMALLEY,
              VAN BENTHEM AND WILLIAMS VS. THE QUIGLEY CORPORATION

On November 4, 2004, seven (7) plaintiffs filed an action in the Court of Common
Pleas of Bucks  County,  Pennsylvania,  against  The  Quigley  Corporation.  The


                                      -11-




complaint  was  amended  on  March  11,  2005  to add an  additional  eight  (8)
plaintiffs in the action.  The action alleges that plaintiffs  suffered  certain
losses and  injuries as a result of using the  Company's  nasal  spray  product.
Among the  allegations of plaintiffs are claims that The Quigley  Corporation is
liable to them based on alleged  negligence,  alleged strict products  liability
(failure to warn and  defective  design),  alleged  breach of express  warranty,
alleged breach of implied warrant,  and an alleged violation of the Pennsylvania
Unfair Trade Practices and Consumer Protection Law and other Consumer Protection
Statutes.

At the present time,  the matter is being  defended by the  Company's  insurance
carrier.  An answer  stating  affirmative  defenses  has been  filed.  Pre-trial
discovery is being scheduled.

The Company  believes  plaintiffs'  claims are without  merit and is  vigorously
defending those claims. Based upon the information the Company has at this time,
it believes the action will not have a material impact to the Company.  However,
at this time no prediction as to the outcome can be made.

               THE QUIGLEY CORPORATION VS. JOHN C. GODFREY, ET AL.

This action was commenced in November 2004 in the Court of Common Pleas of Bucks
County,  Pennsylvania.  In that action,  the Company is seeking  declaratory and
injunctive  relief  against John C.  Godfrey,  Nancy Jane  Godfrey,  and Godfrey
Science and Design, Inc. requesting injunctive relief regarding the Cold-Eeze(R)
trade  name  and  trademark;   injunctive   relief  regarding  the  Cold-Eeze(R)
formulations and  manufacturing  methods and injunctive relief for breach of the
duty of loyalty.  The  Company's  Complaint is based in part upon the  Exclusive
Representation and Distribution Agreement and the Consulting Agreement (together
the  "Agreements")  entered into  between the  defendants  and the Company.  The
Company terminated the Agreements for the defendants'  alleged material breaches
of  the  Agreements.   Defendants  have  answered  the  complaint  and  asserted
counterclaims  against the Company seeking remedies  relative to the Agreements.
The Company has moved to dismiss  portions of defendant's  counterclaims  on the
grounds that they are without merit.

The  Corporation  believes  Defendant's  claims  are  without  merit,  and it is
vigorously  defending the  counterclaims  and is  prosecuting  its action on its
complaint.  Based upon the information the Company has at this time, it believes
the action will not have a material impact to the Company. However, at this time
no prediction as to the outcome can be made.

            AXIS SPECIALTY INSURANCE CO. VS. THE QUIGLEY CORPORATION

This action,  filed in January 2005 in the Federal  Eastern  District  Court for
Pennsylvania,  stems from a dispute  between  the  Company and one of its excess
liability insurance carriers,  who seeks a judicial declaration of its insurance
coverage  obligations  under a  policy  which  terminates  in  March  2005.  The
carrier's  action follows a complaint by the Company filed in December 2004 with
the Pennsylvania  Insurance Commission,  which ultimately sided with the Company
in determining that the carrier failed to observe proper notification procedures
when it first sought to limit,  or  alternatively,  to insure at a substantially
higher premium,  its coverage  obligations.  This action seeks to deny insurance
coverage for certain  product  liability  claims based on  occurrences  prior to
April 6, 2004.

The Company has filed a  counterclaim  requesting  a  declaration  of  insurance
coverage under the insurance policy referenced above. The litigation potentially
affects  the amount of the  Company's  liability  coverage  for the nasal  spray
personal injury litigation described above.

The Company  believes  plaintiffs'  claims are without  merit and is  vigorously
defending those claims. Based upon the information the Company has at this time,
it believes the action will not have a material impact to the Company.  However,
at this time no prediction as to the outcome can be made.

                          TERMINATED LEGAL PROCEEDINGS

                               GOLDBLUM AND WAYNE

An action was  commenced on March 17, 1996 by Goldblum and Wayne in the Court of
Common Pleas of Montgomery  County alleging that the plaintiffs became owners of
500,000 shares each of the Company's common stock in or about 1990 and requested
damages in excess of $100,000 for breach of contract and conversion. The Company
vigorously defended this lawsuit through trial during January 2004 when the jury
returned a unanimous verdict in favor of the Company.  Plaintiffs filed a Motion
for  Post  Trial  Relief with the Court of Common Pleas of Montgomery County but


                                      -12-




failed to produce a record or file a Brief in Support of their Motion within the
timelines called for by the Pennsylvania  Rules of Civil Procedure.  The Quigley
Corporation has taken judgment on the verdict in its favor and the appeal period
has expired. This action is now concluded.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
         MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

MARKET INFORMATION

The Company's Common Stock,  $.0005 par value, is currently traded on The NASDAQ
National  Market  under the  trading  symbol  "QGLY." The price set forth in the
following table  represents the high and low bid prices for the Company's common
stock.


                                                    Common Stock
                                                    ------------
                                           2004                     2003
                                  ---------------------    ---------------------
        Quarter Ended                High          Low        High        Low
        -------------                ----          ---        ----        ---

        March 31                  $   10.89    $   8.50    $    7.76    $   4.71
        June 30                   $   10.29    $   6.92    $    8.22    $   5.39
        September 30              $    9.94    $   7.35    $   10.51    $   6.75
        December 31               $    9.92    $   7.56    $   11.12    $   7.32

Such quotations  reflect  inter-dealer  prices,  without  mark-up,  mark-down or
commission and may not represent actual transactions.

The  Company's   securities  are  traded  on  The  NASDAQ  National  Market  and
consequently  stock  prices  are  available  daily as  generated  by The  NASDAQ
National Market established quotation system.

HOLDERS

As of December 31, 2004, there were  approximately  350 holders of record of the
Company's  Common Stock,  including  brokerage firms,  clearing  houses,  and/or
depository firms holding the Company's  securities for their respective clients.
The exact number of beneficial  owners of the Company's  securities is not known
but exceeds 400.

DIVIDENDS

The Company has not declared,  nor paid, any cash dividends on its Common Stock.
At this time the Company intends to retain its earnings to finance future growth
and  maintain   liquidity.   In   September   2004,   the  Company   declared  a
dividend-in-kind  of an aggregate  499,282 shares of Suncoast's  common stock to
its stockholders.

SALES OF UNREGISTERED SECURITIES TO JOEL, INC.

In connection  with the closing of the Company's  acquisition  of certain assets
and  assumption of certain  liabilities  of JoEl,  Inc. on October 1, 2004,  the
Company issued an aggregate of 113,097  unregistered  shares of its Common Stock
as part of the purchase price to the  shareholders of JoEl, Inc.  pursuant to an
asset  purchase  and sale  agreement by and between  JoEl,  Inc. and the Company
dated as of August 18, 2004. The issuance of the 113,097 shares was deemed to be
exempt from  registration  under the  Securities  Act of 1933,  as amended  (the
"Securities  Act"),  in  reliance  on Section  4(2) of the  Securities  Act as a
transaction by an issuer not involving a public offering.


                                      -13-




WARRANTS AND OPTIONS

In addition to the Company's outstanding Common Stock, there are, as of December
31, 2004, issued and outstanding Common Stock Purchase Warrants and Options that
are exercisable at the price-per-share  stated and expire on the date indicated,
as follows:

       Description         Number        Exercise Price       Expiration Date
       -----------         ------        --------------       ---------------
     CLASS "E"             850,000           $1.7500           June 30, 2006
     CLASS "F"             225,000           $2.5000           November 4, 2006
     CLASS "G"             585,000          $10.0000           May 5, 2007
     Option Plan           396,500           $9.6800           December 1, 2007
     Option Plan           331,000           $5.1250           April 6, 2009
     Option Plan           262,000           $0.8125           December 20, 2010
     Option Plan           304,000           $1.2600           December 10, 2011
     Option Plan           345,000           $5.1900           July 30, 2012
     Option Plan           102,000           $5.4900           December 17, 2012
     Option Plan           424,000           $8.1100           October 29, 2013
     Option Plan           500,000           $9.5000           October 26, 2014

At December 31, 2004,  there were 4,324,500  unexercised  and vested options and
warrants of the Company's Common Stock available for exercise.

SECURITIES AUTHORIZED UNDER EQUITY COMPENSATION

The following  table sets forth certain  information  regarding stock option and
warrant grants made to employees, directors and consultants:

       SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS


                                                   Number of       Weighted           Number of Securities
                                               Securities to be     Average         Remaining Available for
                                                 Issued Upon    Exercise Price    Future Issuance Under Equity
                                                 Exercise of     Outstanding           Compensation Plans
          Plan Category                          Outstanding      Options &          (Excluding Securities
                                              Options & Warrants   Warrants          Reflected in Column A)
                                                     (A)              (B)                    ( C )
--------------------------------------------------------------------------------------------------------------

Equity Plans Approved by Security Holders(1)       2,664,500         $6.26                   200,000

Equity Plans Not Approved by Security Holders(2)   1,660,000         $4.76                         -

Total                                              4,324,500         $5.68                   200,000

(1)  An incentive  stock option plan was  instituted  in 1997,  (the "1997 Stock
     Option Plan") and approved by the stockholders in 1998. Options pursuant to
     the 1997  Stock  Option  Plan have been  granted  to  directors,  executive
     officers, and employees.
(2)  Other  grants  of  warrants  are  specific  and not  part of a plan.  These
     specific grants were to executive  officers,  employees and consultants for
     services in 1996 and 1997.


                                      -14-




ITEM 6.  SELECTED FINANCIAL DATA

The following  table sets forth the selected  financial  data of the Company for
and at the end of the years ended December 31, 2004, 2003, 2002, 2001 and 2000.

The data  presented  below  should  be read in  conjunction  with  "Management's
Discussion and Analysis of Financial Condition and Results of Operation" and the
Company's financial statements and notes thereto appearing elsewhere herein.

(AMOUNTS IN THOUSANDS, EXCEPT             YEAR  ENDED   YEAR  ENDED   YEAR  ENDED   YEAR  ENDED   YEAR  ENDED
  PER SHARE DATA)                         DECEMBER 31,  DECEMBER 31,  DECEMBER 31,  DECEMBER 31,  DECEMBER 31,
                                             2004         2003           2002         2001            2000
                                          --------------------------------------------------------------------
STATEMENT OF INCOME DATA:
Net sales                                  $43,948      $41,499       $29,272       $21,226       $15,527
Total revenue                               43,948       41,499        29,421        22,772        15,527
Gross profit                                20,375       20,011        12,212        12,551         9,411
Income (loss) - continuing operations          453          729        (5,132)          934        (5,059)
Loss - discontinued operations (1)            --            (54)       (1,322)         (718)         (137)
Net income (loss)                              453          675        (6,454)          216        (5,196)

Basic earnings (loss) per share:
       Continuing operations                 $0.04        $0.06        ($0.47)        $0.09        ($0.48)
       Discontinued operations                --           --          ($0.12)       ($0.07)       ($0.01)
       Net income (loss)                     $0.04        $0.06        ($0.59)        $0.02        ($0.49)
Diluted earnings (loss) per share:
       Continuing operations                 $0.03        $0.05        ($0.47)        $0.09        ($0.48)
       Discontinued operations                --           --          ($0.12)       ($0.07)       ($0.01)
       Net income (loss)                     $0.03        $0.05        ($0.59)        $0.02        ($0.49)
Weighted average shares outstanding:
       Basic                                11,541       11,467        10,894        10,675        10,551
       Diluted                              14,449       14,910        10,894        10,751        10,551


                                            AS OF         AS OF         AS OF         AS OF         AS OF
                                          DECEMBER 31,  DECEMBER 31,  DECEMBER 31,  DECEMBER 31,  DECEMBER 31,
                                             2004         2003           2002         2001            2000
                                          --------------------------------------------------------------------
BALANCE SHEET DATA:
Working capital                            $17,853      $18,257       $16,662       $18,626       $18,622
Total assets                                31,530       26,270        24,935        24,756        26,056
Debt                                         2,893         --            --            --            --
Stockholders' equity                       $21,902      $20,787       $19,121       $21,200       $20,971

(1) In December 2002,  the Board of Directors of the Company  approved a plan to
sell Caribbean Pacific Natural Products, Inc. ("CPNP"). On January 22, 2003, the
Board of Directors of the Company completed the sale of the Company's 60% equity
interest in CPNP to Suncoast  Naturals,  Inc.  The sale of this segment has been
treated  as  discontinued   operations  and  all  periods  presented  have  been
reclassified.


                                      -15-




ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

OVERVIEW

The  Quigley   Corporation,   (the  "Company"),   headquartered  in  Doylestown,
Pennsylvania,  is  a  leading  manufacturer,   marketer  and  distributor  of  a
diversified range of health and homeopathic products.

The Company's  business interests  comprise four segments,  namely  cold-remedy,
health and wellness, contract manufacturing and ethical pharmaceutical.

The Cold-Eeze(R)  product continues to be the primary product of the cold-remedy
segment and is  available  in  lozenge,  gum and  sugar-free  tablet  form.  The
Kidz-Eeze(TM)  Sore Throat product was launched during the third quarter of 2003
in preparation for the cold season.  A nasal spray product  launched at the same
time has since been discontinued due to the product's failure to meet either the
Company's  sales  expectations  or its  return on  investment  projections.  The
efficacy of the Cold-Eeze(R)  product was established  following the publication
of the second  double blind study in July 1996. A 2002 study also found that the
use of Cold-Eeze(R) to treat a cold statistically reduced the use of antibiotics
for  respiratory  illnesses by 92% when  Cold-Eeze(R) is administered as a first
line treatment  approach to the common cold. In May 2003, the Company  announced
the findings of a prospective  study,  conducted at the Heritage School facility
in  Provo,  Utah,  in  which  178  children  ages  12 to  18  years  were  given
Cold-Eeze(R)  lozenges both symptomatically and prophylactically from October 5,
2001 to May 30, 2002.  The study found a 54%  reduction  in the most  frequently
observed cold duration.  Those subjects not receiving  treatment most frequently
experienced  symptom duration at 11 days compared with 5 days when  Cold-Eeze(R)
lozenges were administered, a reduction of 6 days.

In October  2004,  the  Company  acquired  certain  assets and  assumed  certain
liabilities of JoEl, Inc., the contract manufacturer of the Cold-Eeze(R) lozenge
since its inception.  This is now the contract  manufacturing  business segment,
Quigley Manufacturing Inc. ("QMI"), a wholly owned subsidiary of the Company. In
addition to  manufacturing  the lozenge form of the Cold-Eeze(R)  product,  this
subsidiary will continue to warehouse and ship all products  related to the cold
remedy  segment.  QMI also  manufactures  a variety  of hard  candies  including
organic and seasonal  candy  products under its own brand names along with other
such  products  in the  capacity  of  contract  manufacturing  for  third  party
customers.  QMI is an FDA approved  facility.  The  acquisition  was executed to
ensure that the integrity and formulation of the Cold-Eeze(R)  products remained
under the  control of the Company and the  assurances  of a continued  supply of
Cold-Eeze(R) to the  marketplace.  The asset  acquisition was financed by way of
internal working capital, approximating $1,200,000, the issuance of stock of the
Company,  in  the  value  of  approximately  $1,000,000,  and  a  bank  loan  of
$3,000,000.

Cold-Eeze(R) is distributed through numerous  independent,  chain drug, food and
discount  stores  throughout  the United  States.  Net sales of the  cold-remedy
segment  increased 11.5% in 2004 over the prior year,  resulting in net sales in
2004 of  $22,834,249  compared to $20,474,969 in 2003. The increase in sales may
be attributable to expanded media  advertising and continued  product support at
retail level through broad co-operative  advertising programs and also promotion
events  beneficial to the consumer.  Additionally,  the cold remedy  segment may
have benefited from the media attention  afforded to the scarcity of flu vaccine
and the  resulting  media  attention.  Net  sales in 2004 of this  segment  were
negatively impacted by approximately $680,000 as a result of the discontinuation
of the nasal spray product in September  2004,  and cost of sales were increased
by  approximately  $672,000  due to  obsolete  product and  materials,  together
combining to a reduction to gross margin of approximately $1,400,000 due to this
discontinuation.

The  Company  continues  to  use  the  resources  of  independent  national  and
international brokers to represent the Company's  Cold-Eeze(R)  products,  which
provides cost efficiencies that benefit the Company.

During  2004,  the  Company  continued  the process of the  registration  of the
Cold-Eeze(R)  products  in the United  Kingdom as a pharmacy  drug and  incurred
approximately $431,000 in related expenses.

Darius, through Innerlight Inc., is a direct selling company specializing in the
development  and  distribution  of  proprietary  health  and  wellness  products
primarily  within the United  States,  with the  commencement  of  international
business activity during the second quarter of 2003. Net sales of the health and
wellness  segment in 2004 were  $20,361,391  a decrease of $662,803 or 3.2% over
the 2003 net sales of  $21,024,194.  While net sales  within the  United  States
slowed in 2004  compared to 2003,  international  sales  increased by 135%.  The
formation  of Darius has  provided  diversification  to the  Company in both the
method of product  distribution  and the broader range of products  available to
the  marketplace  serving as a balance  to the  seasonal  revenue  cycles of the
Cold-Eeze(R) branded products.


                                      -16-




The establishment of an ethical  pharmaceutical  subsidiary,  Pharma, may enable
the Company to diversify into the  prescription  drug market and ensure safe and
effective distribution of these important potential new products currently under
development.  At this time, the Company has been assigned five patents following
the filing of patent  applications  with the Patent  Office of the Unites States
Commerce  Department  and has filed one patent  application  within the European
Community.  Clinical study costs  associated  with Pharma  projects in 2004 were
approximately $3,100,000 related to development work being undertaken by Pharma,
an  increase  of  approximately  $201,000  over the  prior  year as a result  of
increased study activity in various areas of interest.

With  the  exception  of the  Cold-Eeze(R)  lozenge  product  and  the  products
manufactured by QMI under its own brand of hard, organic and seasonal candy, the
manufacturing  of all of the  Company's  remaining  products  is carried  out by
outside sources.

Operating  expenses  during  2004  increased  over those of 2003  largely due to
increased media advertising focused on the initial stages of the cold season.

Future revenues,  costs,  margins, and profits will continue to be influenced by
the Company's  ability to maintain its  manufacturing  availability and capacity
together with its marketing and  distribution  capabilities in order to continue
to  compete  on a  national  and  international  level.  The  formation  of QMI,
following the acquisition of certain assets and assuming certain  liabilities of
JoEl,  Inc.,  serves to protect the future  availability  and  integrity  of the
Cold-Eeze(R)  product and also makes  available to the Company the operations of
an FDA approved facility for any future product development and manufacture.

In December 2002, the Board of Directors of the Company  approved a plan to sell
CPNP, which was originally acquired in July 2000. On January 22, 2003, the Board
of  Directors  of the Company  completed  the sale of the  Company's  60% equity
interest in CPNP to Suncoast.  In exchange for its 60% equity  interest in CPNP,
the Company  received  750,000  shares of  Suncoast's  common  stock and 100,000
shares of Suncoast's Series A Redeemable Preferred Stock, which bear interest at
a rate of 4.25% per annum and which is redeemable  from time to time after March
31,  2003 in such  amounts as is equal to 50% of the free cash flow  reported by
Suncoast in the immediately  preceding quarterly financial statements divided by
the redemption price of $10.00 per share.  Following the purchase by Suncoast of
the Company's 60% equity interest in CPNP, the Company owned 19.5% of Suncoast's
issued and  outstanding  capital  stock valued at $79,365,  which  investment is
accounted for on the cost basis method,  representing the Company's share of the
fair value of Suncoast at the time the  transaction  was recorded.  In September
2004, the Company declared a dividend-in-kind  of an aggregate of 499,282 shares
of Suncoast's  common stock to its  stockholders  and accordingly the investment
value has been  reduced to $26,455 at December  31,  2004.  Following  the stock
dividend, the Company's holding in Suncoast is approximately 5%.

EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS

In December 2003, the Financial Accounting Standards Board (FASB or the "Board")
issued FASB  INTERPRETATION  NO. 46 (REVISED  DECEMBER 2003),  CONSOLIDATION  OF
VARIABLE INTEREST ENTITIES (FIN 46R), to address certain  implementation issues.
FIN 46R varies  significantly from FASB Interpretation No. 46,  CONSOLIDATION OF
VARIABLE INTEREST  ENTITIES (FIN 46), which it supersedes.  FIN 46R requires the
application  of either FIN 46 or FIN 46R by  "Public  Entities"  to all  Special
Purpose  Entities  ("SPEs") at the end of the first interim or annual  reporting
period  ending after  December 15, 2003.  FIN 46R is  applicable to all non-SPEs
created prior to February 1, 2003 by Public Entities that are not small business
issuers at the end of the first interim or annual  reporting period ending after
March 15, 2004. The Company has determined that  Scandasystems,  a related party
(see Notes 4 and 16),  qualifies as a variable interest entity and was initially
consolidated  beginning  with the quarter ended March 31, 2004.  Due to the fact
that the Company has no long-term  contractual  commitments or  guarantees,  the
maximum exposure to loss is insignificant.

On  December  16,  2004,  the FASB  issued  STATEMENT  NO. 123  (REVISED  2004),
SHARE-BASED  PAYMENT  (STATEMENT  123(R)),  which  replaces  Statement  No. 123,
"Accounting  for Stock-Based  Compensation,"  and supersedes APB Opinion No. 25,
"Accounting  for Stock  Issued to  Employees."  Statement  123 (R)  requires all
companies to measure  compensation cost for all share-based  payments (including
employee  stock  options) at fair value and  recognize the cost in the financial
statements  beginning  with the first  interim or annual  reporting  period that
begins after June 15, 2005. The pro forma disclosures previously permitted under
Statement  123  will  no  longer  be  an  alternative  to  financial   statement
recognition. The Company is required to adopt Statement 123(R) beginning July 1,
2005.  This  statement  applies to all awards granted after the date of adoption
and  to  awards  modified,  repurchased,  or  cancelled  after  that  date.  The
cumulative  effect of  initially  applying  Statement  123(R),  if any,  will be
recognized as of the date of adoption.


                                      -17-




The Company is required to apply  Statement  123(R) using a modified  version of
prospective  application.  Under that transition  method,  compensation  cost is
recognized  on or after the date of  adoption  for the  portion  of  outstanding
awards, for which the requisite service has not yet been rendered,  based on the
grant-date  fair value of those awards  calculated  under  Statement 123 for pro
forma  disclosures.  For periods  before the date of  adoption,  the Company may
elect to apply a  modified  version of  retrospective  application  under  which
financial  statements for prior periods are adjusted on a basis  consistent with
the pro forma  disclosures  required  for those  periods by  Statement  123. The
Company is currently  evaluating the impact of the statement,  but does not plan
to retrospectively apply this statement.

In November 2004, the FASB issued SFAS No. 151,  "INVENTORY COSTS" ("SFAS 151").
SFAS 151 amends the guidance in Chapter 4 of  Accounting  Research  Bulletin No.
43,  "Inventory  Pricing" to clarify the accounting for amounts of idle facility
expense,  freight,  handling costs and wasted  material.  SFAS 151 requires that
these types of items be recognized as current period charges as they occur.  The
provisions of SFAS 151 are effective for inventory  costs incurred during fiscal
years  beginning  after June 15,  2005.  The  adoption  of this  standard is not
expected to have an impact on the  Company's  consolidated  financial  position,
results of operations or cash flows.

CRITICAL ACCOUNTING POLICIES

As   previously   described,   the  Company  is  engaged  in  the   development,
manufacturing,  and marketing of health and homeopathic  products that are being
offered  to the  general  public  and is  also  involved  in  the  research  and
development of potential prescription products.  Certain key accounting policies
that may affect the results of the Company are the timing of revenue recognition
and sales incentives particularly co-operative  advertising;  the classification
of royalties and commissions;  the classification of advertising  expenses;  and
the fact that all research and development costs are expensed as incurred.  Note
1,  Organization  and  Business,   describes  the  Company's  other  significant
accounting policies.

REVENUE RECOGNITION

Cold-remedy  sales  are  recognized  at the time  ownership  and risk of loss is
transferred  to the  customer,  which is  primarily  the time  the  shipment  is
received by the customer.  In the case of the health and wellness  segment sales
and  third  party  sales  from the  contract  manufacturing  segment,  sales are
recognized  at the time goods are  shipped to the  customer.  Sales  returns and
allowances  are provided for in the period that the related  sales are recorded.
Provisions  for these  reserves  are based on  historical  experience.  The 2004
results include a returns  provision of  approximately  $626,000 in the event of
future product returns  following the  discontinuation  of the Cold-Eeze(R) Cold
Remedy Nasal Spray product in September 2004.

ROYALTIES AND COMMISSIONS

The Company  includes  royalties and founders'  commissions  incurred as cost of
sales for the Cold Remedy segment and in administration  expenses for the Health
and Wellness  segment based on agreement  terms. The Health and Wellness segment
expense  relates  to the  Company's  agreement  with the  former  owners  of the
Utah-based direct marketing and selling company,  whereby they receive payments,
currently totaling 5% of net sales collected,  for use of product  formulations,
consulting,  confidentiality and non-compete  agreements with such expense being
expensed  as  incurred.   Commission  expense  related  to  independent  brokers
associated with the cold remedy and contract  manufacturing segments is included
in administration expenses.  Independent  representative commissions incurred by
the Health and Wellness segment are included in cost of sales.

ADVERTISING

Advertising  costs are  expensed  within the period in which they are  utilized.
Advertising expense is made up of media advertising,  presented as part of sales
and marketing  expense;  co-operative  advertising,  which is accounted for as a
deduction from sales; and bonus product,  which is accounted for as part of cost
of sales.  The level of  advertising  expense to be incurred is determined  each
period to coincide with management's sales and marketing strategies. Advertising
costs  incurred  for the  years  ended  December  31,  2004,  2003 and 2002 were
$6,584,600, $5,483,465 and $4,794,955, respectively. This expense item increased
in 2004 due to management's  decision to advertise  during the initial stages of
the  2004/2005  cold season in  contrast to the prior year.  Included in prepaid
expenses and other current  assets were $41,375 and $68,000 at December 31, 2004
and December 31, 2003, respectively, related to prepaid advertising expenses.

RESEARCH AND DEVELOPMENT

Research and development costs are charged to operations in the period incurred.
Expenditures  for the  years  ended  December  31,  2004,  2003  and  2002  were
$3,232,569, $3,365,698, $2,663,291, respectively. The primary reason for the


                                      -18-




decrease  in  expenditure  in  2004  was  reduced   Cold-Eeze(R)  related  costs
accompanied by a partial offset as a result of increased Pharma costs. Pharma is
currently involved in research activity  following patent  applications that the
Company has  acquired.  Research and  development  costs,  relating to potential
products,  are expected to increase  significantly over time as product research
and testing continues.

RESULTS OF OPERATIONS

TWELVE MONTHS ENDED DECEMBER 31, 2004 COMPARED WITH SAME PERIOD 2003

Revenues  from  continuing  operations  for 2004 were  $43,947,995  compared  to
$41,499,163  for 2003,  reflecting  an  increase of 5.9% in 2004.  Revenues,  by
segment,   for  2004  were  cold-remedy,   $22,834,249;   health  and  wellness,
$20,361,391; and contract manufacturing,  $752,355, as compared to 2003 when the
revenues for each respective segment were $20,474,969, $21,024,194 and zero. The
contract manufacturing segment refers to the third party sales generated by QMI.
In  addition  to  the  manufacture  of  the  Cold-Eeze(R)   product,   QMI  also
manufactures  a variety of hard and  organic  candies  under its own brand names
along with other products on a contract manufacturing basis for other customers.
The 2004 revenues for the cold-remedy  segment were  negatively  affected by the
discontinuation  of the nasal  spray  product,  reducing  the 2004  revenues  by
approximately  $680,000 as a result of actual and anticipated  product  returns.
Notwithstanding the discontinuation of the nasal spray product,  the cold-remedy
segment reported increased revenues which may be attributable to strategic media
advertising during the early part of the cold season,  strong trade and consumer
product  promotions,  and media  attention  during  the  fourth  quarter of 2004
following the reported scarcity of flu vaccine products. The health and wellness
segment  reported reduced revenues in 2004 of $662,803 over the prior year. This
segment experienced a reduction in domestic sales which were offset by increased
sales to international markets of 135%.

Cost of sales from  continuing  operations for 2004 as a percentage of net sales
was 53.6%,  compared  to 51.8% for 2003.  The cost of sales  percentage  for the
cold-remedy segment increased in 2004 by 4.7% primarily due to the impact of the
discontinuation  of the nasal  spray  product.  The  discontinuation  negatively
impacted  net sales by  approximately  $680,000  and  resulted in an  additional
expense to cost of sales of  approximately  $672,000 due to obsolete product and
materials.  Remaining  variations  between  the years is  largely  the result of
product mix. The cost of sales  percentage  for the health and wellness  segment
increased  in 2004 by 1.2%  largely  attributable  to a charge of  approximately
$200,000 related to a reserve for expected obsolete inventory.

Selling,  marketing and administrative  expenses from continuing  operations for
2004 were $16,960,313  compared to $16,010,164 in 2003. The increase in 2004 was
primarily due to increased media advertising of $892,771, largely related to the
commencement of Cold-Eeze(R)  advertising activity earlier in the 2004/2005 cold
season compared to prior year. Selling,  marketing and administrative  expenses,
by  segment,  in  2004  were  cold  remedy  $11,068,726,   health  and  wellness
$5,098,834,  Pharma $492,562 and contract manufacturing $300,191, as compared to
2003  when  these  expenses  for  each  respective   segment  were  $10,061,349,
$5,396,696, $552,119 and zero.

Research and development costs from continuing  operations in 2004 and 2003 were
$3,232,569 and $3,365,698,  respectively.  Principally, the decrease in research
and  development  expenditure  was the result of decreased  cold-remedy  related
product  testing costs in 2004 compared to the prior year,  which were offset by
increased Pharma study costs of approximately $261,000.

During 2004,  the  Company's  major  operating  expenses of salaries,  brokerage
commissions, promotion, advertising, and legal costs accounted for approximately
$12,900,314 (64%) of the total operating expenses of $20,192,882, an increase of
13.9% over the 2003 amount of $11,328,608, largely the result of increased media
advertising and payroll costs in 2004.

Revenues of CPNP  (discontinued  operations) for the twelve months periods ended
December 31, 2004 and 2003 were zero and $59,824,  respectively,  and net losses
for the same periods were zero and $54,349. The results of CPNP are presented as
discontinued operations in the Statements of Operations.

Total assets of the Company at December 31, 2004 and 2003 were  $31,529,756  and
$26,269,759,  respectively. Working capital decreased by $404,444 to $17,852,910
at December 31, 2004.  The primary  influences  on working  capital  during 2004
were: the increase in cash balances,  decreased account receivable  balances due
to attentive collections management, reductions in inventory on hand as a result
of increased  revenues and  management  control;  increased  liabilities  due to
current  portion of long term debt of  $428,571  related to the  acquisition  of
certain assets,  (primarily  property,  plant and equipment),  and assumption of
certain liabilities of the former contract manufacturer, JoEl, Inc., now Quigley
Manufacturing  Inc. ("QMI") , along with the inclusion of assets and liabilities
relating to QMI at December 31, 2004,  and the increase in  advertising  payable
balances due to increased advertising activity in the latter part of 2004.


                                      -19-




TWELVE MONTHS ENDED DECEMBER 31, 2003 COMPARED WITH SAME PERIOD 2002

Revenues  from  continuing  operations  for 2003 were  $41,499,163  compared  to
$29,420,646  for 2002, an increase of 41% in 2003.  Revenues for 2003  comprised
$20,474,969  relating to the  cold-remedy  segment,  primarily the  Cold-Eeze(R)
product, and $21,024,194 from the health and wellness segment,  compared to 2002
revenues of $14,199,833 and $15,220,813,  by each respective  segment.  The 2002
cold-remedy  revenues  included  an  amount  of  $148,866  as a  result  of  the
settlement  of the  infringement  suit against Gel Tech,  LLC, the  developer of
Zicam(TM), and Gum Tech International,  Inc., its distributor. The 2003 increase
in the  revenues  of the  cold-remedy  segment  may have  been  attributable  to
management's  strategy in supporting the Cold-Eeze(R) product in the marketplace
by way of media  advertising and ongoing  co-operative  advertising  initiatives
with the Company's  customer base. The segment may also have been  influenced by
media  attention to the  possibility of increased cold and influenza  incidences
during the  2003/2004  cold  season.  The health and wellness  segment  reported
significantly  increased  revenues  in 2003 of  $5,803,380  over the prior  year
primarily  due  to  the  recruitment  by  the  Company  of  active   independent
representatives  along with the Company entering the international market during
the second quarter of 2003.

Cost of sales from  continuing  operations for 2003 as a percentage of net sales
was  51.8%  compared  to 58.8% for 2002.  The cost of sales  percentage  for the
cold-remedy  segment  was  reduced  in 2003 by 8.2%  due to  decreased  costs of
product bonus promotions and considerably  reduced royalty charges  attributable
to the nasal and throat pop products.  The 2002 amount also included charges for
inventory obsolescence. The cost of sales percentage for the health and wellness
segment  decreased in 2003 by 5.2% largely  attributable  to fluctuations in the
commission expense payable to the independent representatives along with charges
in 2002 as a result of obsolete inventory on hand.

Selling,  marketing and administrative  expenses from continuing  operations for
2003 were $16,010,164  compared to $14,832,935 in 2002. The increase in 2003 was
primarily due to increased  media  advertising of $845,055  necessary to support
the  Cold-Eeze(R)  product along with increased costs associated with the health
and  wellness  segment  of  approximately  $2,161,000  primarily  related to the
generation of increased  revenues.  The 2002 expenses included a non-cash charge
of $2,100,000 for warrants  granted in connection with consulting  services with
no comparable charge in 2003.

Research and development costs from continuing  operations in 2003 and 2002 were
$3,365,698 and $2,663,291,  respectively.  Principally, the increase of research
and  development  in 2003  was due to  increased  expenses  associated  with the
ongoing research and clinical activity of Pharma in the amount of $642,983.

During 2003,  the  Company's  major  operating  expenses of salaries,  brokerage
commissions, promotion, advertising, and legal costs accounted for approximately
$11,328,608 (58%) of the total operating expenses of $19,375,862, an increase of
2% over the 2002 amount of $11,143,588.  The selling, general and administrative
expenses  related to Darius for 2003 and 2002 were  $5,396,696  and  $3,235,793,
respectively.

Revenues of CPNP  (discontinued  operations) for the twelve months periods ended
December 31, 2003 and 2002 were $59,824, and $2,040,312,  respectively,  and net
losses for the same periods were $54,349 and $1,322,355. The results of CPNP are
presented as discontinued operations in the Statements of Operations and Balance
Sheets.

Total assets of the Company at December 31, 2003 and 2002 were  $26,269,759  and
$24,934,956,   respectively.   Working   capital   increased  by  $1,595,405  to
$18,257,354  at December 31, 2003.  The primary  influences  on working  capital
during 2003 were: the decrease in cash balances,  increased  account  receivable
balances due to increased revenues,  reductions in inventory on hand as a result
of increased  revenues and management  control;  increases in both other current
liabilities  and accrued  royalty and sales  commissions  due to improved  sales
activity in 2003.

MATERIAL COMMITMENTS AND SIGNIFICANT AGREEMENTS

Effective  October 1, 2004,  the  Company  acquired  certain  assets and assumed
certain  liabilities of JoEl,  Inc., the sole  manufacturer of the  Cold-Eeze(R)
lozenge  product.  As part of the  acquisition,  the Company entered into a loan
obligation in the amount of $3.0 million  payable to PNC Bank,  N.A. The loan is
collateralized  by  mortgages  on real  property  located  in  each of  Lebanon,
Pennsylvania  and  Elizabethtown,  Pennsylvania  and  was  used to  finance  the
majority  of the cash  portion of the  purchase  price.  The  Company  can elect
interest  rate options of either the Prime Rate or LIBOR plus 200 basis  points.
The loan is payable in eighty-four equal monthly  principal  payments of $35,714
commencing  November 1, 2004,  and such  amounts  payable are  reflected  in the
consolidated  balance sheet as current  portion of long-term  debt  amounting to
$428,571  and  long  term  debt  amounting  to  $2,464,286.  The  Company  is in
compliance with all related loan covenants.


                                      -20-




With the exception of the Company's  Cold-Eeze(R) lozenge product, the Company's
products are  manufactured  by outside  sources.  The Company has  agreements in
place with these  manufacturers,  which ensure a reliable  source of product for
the future.

The Company has agreements in place with  independent  brokers whose function is
to  represent  the  Company's  Cold-Eeze(R)  products,  in a  product  sales and
promotion  capacity,  throughout  the  United  States and  internationally.  The
brokers are remunerated through a commission structure, based on a percentage of
sales collected, less certain deductions.

The Company has maintained a separate  representation and distribution agreement
relating to the development of the zinc gluconate  glycine product  formulation.
In return for exclusive  distribution rights, the Company must pay the developer
a 3% royalty and a 2%  consulting  fee based on sales  collected,  less  certain
deductions,  throughout  the term of this  agreement,  which is due to expire in
2007.  However,  the Company and the developer are in litigation and as such, no
potential  offset  from such  litigation  for these fees have been  recorded.  A
founder's  commission totaling 5%, on sales collected,  less certain deductions,
is paid to two of the  officers  of the  Company,  who are  also  directors  and
stockholders of the Company,  and whose agreements  expire in 2005. The expenses
for the respective  periods relating to such agreements  amounted to $2,058,965,
$1,805,294 and $1,421,475 for the twelve months periods ended December 31, 2004,
2003 and 2002, respectively.  Amounts accrued for these expenses at December 31,
2004 and December 31, 2003 were $1,129,654 and $915,109, respectively.

The Company has an agreement  with the former  owners of the  Utah-based  direct
marketing and selling company, whereby they receive payments, currently totaling
5% of  net  sales  collected,  for  use  of  product  formulations,  consulting,
confidentiality and non-compete  agreements.  Amounts paid or payable under such
agreement  during 2004,  2003 and 2002 were  $800,881,  $880,091  and  $678,454,
respectively. Amounts payable under such agreement at December 31, 2004 and 2003
were $60,876 and $68,388, respectively.

In August 2003,  the Company  entered into a licensing  agreement  with a patent
holder  relating to the utilization of a nasal spray product in the treatment of
symptoms of the common cold.  The Company  agreed to pay the patent holder a two
percent royalty on net sales of nasal spray products,  less certain  deductions,
throughout the term of this agreement, expiring no later than April 2014. As the
nasal  spray  product  has now been  discontinued,  no further  obligations  are
expected to materialize in relation to this  agreement.  Amounts paid or payable
under such  agreement  during the twelve month periods ended  December 31, 2004,
2003 and 2002 were zero, $26,613 and zero, respectively. An amount of $4,606 was
returnable  to the Company by the patent  holder at December 31, 2004,  while an
amount of $1,613  relating to this  agreement was accrued or payable at December
31, 2003.

Certain  operating  leases for  office and  warehouse  space  maintained  by the
Company resulted in rent expense for the years ended December 31, 2004, 2003 and
2002, of $335,226,  $255,078,  and $236,304,  respectively.  The future  minimum
lease obligations under these operating leases are approximately $320,000.

LIQUIDITY AND CAPITAL RESOURCES

The Company had working  capital of $17,852,910  and $18,257,354 at December 31,
2004 and 2003,  respectively.  Changes  in  working  capital  overall  have been
primarily  due  to  the  following  items:   cash  balances  have  increased  by
$2,974,352; account receivable balances decreased by $1,485,904 due to effective
collection  practices;  inventory  decreased by $298,221 due to increased  sales
activity and the management of inventory levels;  accrued advertising  increased
by $564,475 due to the  rescheduling of media  advertising in 2004 to earlier in
the cold  season in  contrast  to the  prior  year;  and an  amount  in  current
liabilities of $428,571  relating to the current  principal  portion of the loan
liability due to the acquisition of JoEl, Inc.  effective  October 1, 2004 while
the assets acquired are presented in property,  plant and equipment.  Total cash
balances  at December  31, 2004 were  $14,366,441  compared  to  $11,392,089  at
December 31, 2003.

Management  believes that its revised  strategy to establish  Cold-Eeze(R)  as a
recognized   brand  name,  its  broader  range  of  products,   its  diversified
distribution  methods as it relates to the health and wellness business segment,
adequate  manufacturing  capacity,  and growth in international sales,  together
with its current working  capital,  should provide an internal source of capital
to fund the  Company's  business  operations.  The  cold-remedy  and  health and
wellness  segments  contribute  current  expenditure  support in relation to the
ethical  pharmaceutical   segment.  In  addition  to  anticipated  funding  from
operations,  the  Company  and its  subsidiaries  may in the short and long term
raise capital through the issuance of equity  securities to finance  anticipated
growth.


                                      -21-




Management is not aware of any trends,  events or uncertainties that have or are
reasonably  likely to have a material  negative  impact upon the  Company's  (a)
short-term or long-term  liquidity,  or (b) net sales or income from  continuing
operations.  Any challenge to the Company's  patent rights could have a material
adverse effect on future liquidity of the Company;  however,  the Company is not
aware of any condition that would make such an event probable.

Management believes that cash generated from operations,  along with its current
cash  balances,  will be  sufficient  to finance  working  capital  and  capital
expenditure requirements for at least the next twelve months.

CONTRACTUAL OBLIGATIONS

The Company's  future  contractual  obligations  and commitments at December 31,
2004 consist of the following:

                                                                               PAYMENT DUE BY PERIOD
                                                                               ---------------------
                                                            Less than             2-3               4-5            More than
   Contractual Obligations                  Total             1 year             years             years            5 years
-------------------------------------------------------------------------------------------------------------------------------

Long-Term Debt Obligations (1)           $2,892,857          $428,571          $857,142          $857,142          $750,002
Operating Lease Obligations                 388,000           188,000           200,000              --                --
Purchase Obligations                        207,000           207,000              --                --                --
Research and Development                  1,100,000         1,100,000              --                --                --
Advertising                                 649,000           649,000              --                --                --
                                 ----------------------------------------------------------------------------------------------
Total Contractual Obligations            $5,236,857        $2,572,571        $1,057,142          $857,142          $750,002
                                 ==============================================================================================


(1)  See  Note 8,  "Long-Term  Debt"  to the  Company's  consolidated  financial
     statements for additional information on long-term debt obligations.

OFF-BALANCE SHEET ARRANGEMENTS

It is not the Company's usual business  practice to enter into off-balance sheet
arrangements such as guarantees on loans and financial  commitments and retained
interests in assets  transferred to an unconsolidated  entity for securitization
purposes.  Consequently,  the Company has no off-balance sheet arrangements that
have, or are reasonably  likely to have, a material  current or future effect on
its financial condition,  changes in financial condition,  revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources.

IMPACT OF INFLATION

The Company is subject to normal  inflationary  trends and anticipates  that any
increased costs would be passed on to its customers.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's  operations are not subject to risks of material  foreign currency
fluctuations, nor does it use derivative financial instruments in its investment
practices.  The Company  places its marketable  investments in instruments  that
meet high credit quality standards.  The Company does not expect material losses
with respect to its investment  portfolio or exposure to market risks associated
with interest rates. The impact on the Company's results of one percentage point
change in  short-term  interest  rates  would not have a material  impact on the
Company's future  earnings,  fair value, or cash flows related to investments in
cash  equivalents or  interest-earning  marketable  securities.  At December 31,
2004,  the Company had $2.9 million of variable  rate debt. If the interest rate
on the debt were to increase or  decrease  by 1% for the year,  annual  interest
expense would increase or decrease by approximately $29,000.


                                      -22-




ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


INDEX TO CONSOLIDATED FINANCIAL STATEMENTS                                          Page
                                                                                    ----

Balance Sheets as of December 31, 2004 and 2003                                      F-1

Statements of Operations for the years ended December 31, 2004, 2003, and 2002       F-2

Statements of Stockholders' Equity for the years ended December 31, 2004, 2003,
  and 2002                                                                           F-3

Statements of Cash Flows for the years ended December 31, 2004, 2003, and 2002       F-4

Notes to Financial Statements                                                        F-5 to F-23

Responsibility for Financial Statements                                              F-24

Report of Independent Registered Public Accounting Firm
     Amper, Politziner & Mattia, P.C.                                            F-25

Report of Independent Registered Public Accounting Firm
     PricewaterhouseCoopers LLP                                                      F-26

                                      -23-




                             THE QUIGLEY CORPORATION
                           CONSOLIDATED BALANCE SHEETS


                           ASSETS
                                                                                       December 31, 2004    December 31, 2003
                                                                                       -----------------    -----------------

CURRENT ASSETS:

           Cash and cash equivalents                                                       $ 14,366,441        $ 11,392,089
           Accounts receivable (net of doubtful accounts of $311,764 and $808,812)            6,375,979           7,861,883
           Inventory                                                                          3,454,682           3,752,903
           Prepaid expenses and other current assets                                            764,359             733,597
                                                                                       -----------------    -----------------
               TOTAL CURRENT ASSETS                                                          24,961,461          23,740,472
                                                                                       -----------------    -----------------

PROPERTY, PLANT AND EQUIPMENT - NET                                                           6,473,688           2,418,159
                                                                                       -----------------    -----------------


OTHER ASSETS:
          Goodwill                                                                               30,763              30,763
          Other assets                                                                           63,844              80,365
                                                                                       -----------------    -----------------
                TOTAL OTHER ASSETS                                                               94,607             111,128
                                                                                       -----------------    -----------------

TOTAL ASSETS                                                                               $ 31,529,756        $ 26,269,759
                                                                                       =================    =================

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
           Current portion of long-term debt                                               $    428,571        $       --
           Accounts payable                                                                     978,401             524,136
           Accrued royalties and sales commissions                                            1,796,081           1,594,457
           Accrued advertising                                                                1,919,011           1,354,536
           Other current liabilities                                                          1,986,487           2,009,989
                                                                                       -----------------    -----------------
                TOTAL CURRENT LIABILITIES                                                     7,108,551           5,483,118
                                                                                       -----------------    -----------------

LONG-TERM DEBT                                                                                2,464,286                --

MINORITY INTEREST                                                                                54,980                --

COMMITMENTS AND CONTINGENCIES  (Note 10)

STOCKHOLDERS' EQUITY:

           Common stock, $.0005 par value; authorized 50,000,000;
                Issued:16,285,796 and 16,149,079 shares                                           8,143               8,074
           Additional paid-in-capital                                                        35,203,816          34,281,449
           Retained earnings                                                                 11,878,139          11,685,277
           Less: Treasury stock, 4,646,053 and 4,646,053 shares, at cost                    (25,188,159)        (25,188,159)
                                                                                       -----------------    -----------------
                TOTAL STOCKHOLDERS' EQUITY                                                   21,901,939          20,786,641
                                                                                       -----------------    -----------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                 $ 31,529,756        $ 26,269,759
                                                                                       =================    =================


           See accompanying notes to consolidated financial statements

                                       F-1




                             THE QUIGLEY CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS


                                                                     Year Ended         Year Ended         Year Ended
                                                                 December 31, 2004  December 31, 2003   December 31, 2002
                                                                 -----------------  -----------------   -----------------

NET SALES                                                           $ 43,947,995       $ 41,499,163       $ 29,271,780

LICENSING FEES                                                              --                 --              148,866
                                                                 -----------------  -----------------   -----------------
TOTAL REVENUE                                                         43,947,995         41,499,163         29,420,646
                                                                 -----------------  -----------------   -----------------
COST OF SALES                                                         23,573,126         21,487,763         17,208,836
                                                                 -----------------  -----------------   -----------------
GROSS PROFIT                                                          20,374,869         20,011,400         12,211,810
                                                                 -----------------  -----------------   -----------------
OPERATING EXPENSES:
      Sales and marketing                                              7,140,365          6,166,318          4,941,174
      Administration                                                   9,819,948          9,843,846          9,891,761
      Research and development                                         3,232,569          3,365,698          2,663,291
                                                                 -----------------  -----------------   -----------------
TOTAL OPERATING EXPENSES                                              20,192,882         19,375,862         17,496,226
                                                                 -----------------  -----------------   -----------------

INCOME (LOSS) FROM OPERATIONS                                            181,987            635,538         (5,284,416)
                                                                 -----------------  -----------------   -----------------
OTHER INCOME  (EXPENSE)
      Interest income                                                    104,339             93,385            152,313
      Interest expense                                                   (32,250)              --                 --
      Gain on dividend-in-kind                                           198,786               --                 --
                                                                 -----------------  -----------------   -----------------
TOTAL OTHER INCOME, NET                                                  270,875             93,385            152,313
                                                                 -----------------  -----------------   -----------------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE TAXES                                                             452,862            728,923         (5,132,103)
                                                                 -----------------  -----------------   -----------------

INCOME TAXES                                                                --                 --                 --
                                                                 -----------------  -----------------   -----------------


INCOME (LOSS) FROM CONTINUING OPERATIONS                                 452,862            728,923         (5,132,103)
                                                                 -----------------  -----------------   -----------------

DISCONTINUED OPERATIONS:
 Loss from discontinued operations                                          --              (54,349)          (689,122)

 Loss on impairment related to investment in sun-care and skincare
 Operations                                                                 --                 --             (633,233)

                                                                 -----------------  -----------------   -----------------
NET INCOME (LOSS)                                                       $452,862           $674,574        ($6,454,458)
                                                                 =================  =================   =================

BASIC EARNINGS PER COMMON SHARE:
  Income (loss) from continuing operations                                 $0.04              $0.06             ($0.47)
  Loss from discontinued operations                                         --                 --                (0.12)
                                                                 -----------------  -----------------   -----------------
  Net Income (loss)                                                        $0.04              $0.06             ($0.59)
                                                                 =================  =================   =================

DILUTED EARNINGS PER COMMON SHARE:
  Income (loss) from continuing operations                                 $0.03              $0.05             ($0.47)
  Loss from discontinued operations                                         --                 --                (0.12)
                                                                 -----------------  -----------------   -----------------
  Net Income (loss)                                                        $0.03              $0.05             ($0.59)
                                                                 =================  =================   =================


WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
      Basic                                                           11,541,012         11,467,087         10,893,944
                                                                 =================  =================   =================

      Diluted                                                         14,449,334         14,910,246         10,893,944
                                                                 =================  =================   =================

           See accompanying notes to consolidated financial statements

                                       F-2




                             THE QUIGLEY CORPORATION
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                          COMMON                   ADDITIONAL
                                          STOCK        ISSUED       PAID-IN-          TREASURY        RETAINED
                                          SHARES       AMOUNT       CAPITAL            STOCK          EARNINGS        TOTAL
                                     -----------------------------------------------------------------------------------------

BALANCE DECEMBER 31, 2001               10,675,153     $7,661     $28,915,612      ($25,188,159)    $17,465,161    $21,200,275
                                     -----------------------------------------------------------------------------------------

Tax benefits from options,
  warrants & common stock                                             828,177                                          828,177

Tax benefit allowance                                                (828,177)                                        (828,177)

Warrants issued for service                                         1,125,000                                        1,125,000

Proceeds from options and
  warrants exercised                       781,464        390       3,249,610                                        3,250,000

Net loss                                                                                             (6,454,458)    (6,454,458)
                                     -----------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 2002               11,456,617      8,051      33,290,222       (25,188,159)     11,010,703     19,120,817
                                     -----------------------------------------------------------------------------------------

Tax benefits from options,
  warrants & common stock                                             133,014                                          133,014

Tax benefit allowance                                                (133,014)                                        (133,014)

Warrants issued for service                                           975,000                                          975,000

Proceeds from options and
  warrants exercised                        46,409         23          16,227                                           16,250

Net income                                                                                              674,574        674,574
                                     -----------------------------------------------------------------------------------------

BALANCE DECEMBER 31, 2003               11,503,026      8,074      34,281,449       (25,188,159)     11,685,277     20,786,641

                                     -----------------------------------------------------------------------------------------

Tax benefits from options,
  warrants & common stock                                              67,675                                           67,675

Tax benefit allowance                                                 (67,675)                                         (67,675)

Shares issued for net asset
  acquisition, net of
  registration fees                        113,097         58         895,392                                          895,450

Proceeds from option exercises              23,620         11          26,975                                           26,986

Dividend-in-kind                                                                                       (260,000)      (260,000)

Net Income                                                                                              452,862        452,862
                                     -----------------------------------------------------------------------------------------

BALANCE DECEMBER 31, 2004               11,639,743     $8,143     $35,203,816      ($25,188,159)    $11,878,139    $21,901,939
                                     =========================================================================================



           See accompanying notes to consolidated financial statements

                                       F-3




                             THE QUIGLEY CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                               Year Ended           Year Ended          Year Ended
                                                            December 31, 2004   December 31, 2003    December 31, 2002
                                                            -----------------   -----------------    -----------------
OPERATING ACTIVITIES:
Net income (loss)                                              $    452,862         $    674,574         ($ 6,454,458)
                                                               ------------         ------------         ------------
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO
 NET CASH PROVIDED BY (USED IN) CONTINUING OPERATIONS:
  Loss from discontinued operations                                    --                 54,349              689,122
  Loss on impairment related to discontinued operations                --                   --                633,233
  Depreciation and amortization                                     622,348              473,593              409,068
  Gain on dividend-in-kind                                         (198,786)                --                   --
  Compensation satisfied with common stock warrants                    --                   --              2,100,000
  Bad debts provision                                              (497,048)              71,030               18,472

  (INCREASE) DECREASE IN ASSETS:
       Accounts receivable                                        1,982,952           (3,744,790)             (31,201)
       Inventory                                                  1,198,221              773,858            1,564,459
       Prepaid expenses and other current assets                     47,298             (243,480)             958,040
       Other assets                                                 (33,611)                --                   --
  INCREASE (DECREASE) IN LIABILITIES:
       Accounts payable                                             454,265              129,461             (424,130)
       Accrued royalties and sales commissions                      201,624              447,962              277,874
       Accrued advertising                                          564,475             (205,041)             890,783
       Other current liabilities                                   (134,573)             656,608              508,922
                                                               ------------         ------------         ------------
                 TOTAL ADJUSTMENTS                                4,207,165           (1,586,450)           7,594,642
                                                               ------------         ------------         ------------

NET CASH (USED IN) PROVIDED BY  OPERATING ACTIVITIES              4,660,027             (911,876)           1,140,184
                                                               ------------         ------------         ------------

INVESTING ACTIVITIES:
  Capital expenditures                                             (310,139)            (555,016)            (580,861)
  Cost of assets acquired, net of registration fees              (4,295,380)                --                   --
                                                               ------------         ------------         ------------

NET CASH FLOWS USED IN INVESTING
  ACTIVITIES                                                     (4,605,519)            (555,016)            (580,861)
                                                               ------------         ------------         ------------

FINANCING ACTIVITIES:
  Proceeds from long-term borrowings                              3,000,000                 --                   --
  Principal payments on long-term debt                             (107,142)                --                   --
  Stock options and warrants exercised                               26,986               16,250            3,250,000
                                                               ------------         ------------         ------------
NET CASH FLOWS PROVIDED BY
  FINANCING ACTIVITIES                                            2,919,844               16,250            3,250,000
                                                               ------------         ------------         ------------

NET CASH USED IN DISCONTINUED
  OPERATIONS                                                           --                (54,349)            (596,548)
                                                               ------------         ------------         ------------


NET INCREASE (DECREASE) IN CASH                                   2,974,352           (1,504,991)           3,212,775

CASH & CASH EQUIVALENTS, BEGINNING OF
  PERIOD                                                         11,392,089           12,897,080            9,684,305
                                                               ------------         ------------         ------------

CASH & CASH EQUIVALENTS,
  END OF PERIOD                                                $ 14,366,441         $ 11,392,089         $ 12,897,080
                                                               ============         ============         ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
   INFORMATION:

     NON-CASH INVESTING AND FINANCING:
     Common stock issued for net assets acquired               $    977,158                 --                   --


           See accompanying notes to consolidated financial statements

                                       F-4




                             THE QUIGLEY CORPORATION
                          NOTES TO FINANCIAL STATEMENTS


NOTE 1 - ORGANIZATION AND BUSINESS

The Quigley  Corporation (the "Company"),  organized under the laws of the state
of Nevada, is engaged in the development, manufacturing, and marketing of health
and homeopathic  products that are being offered to the general public,  and the
research and  development  of potential  prescription  products.  The Company is
organized  into four  business  segments,  which  are,  Cold-Remedy,  Health and
Wellness,  Contract  Manufacturing  and Ethical  Pharmaceutical.  For the fiscal
periods presented, the Company's revenues have come primarily from the Company's
Cold-Remedy business segment and the Health and Wellness business segment.

The Company's  principal  cold-remedy  product,  Cold-Eeze(R),  a zinc gluconate
glycine formulation  (ZIGG(TM)) is an over-the-counter  consumer product used to
reduce the duration  and  severity of the common  cold.  The lozenge form of the
product is manufactured by Quigley Manufacturing Inc., a wholly owned subsidiary
of the Company, which was formed following the acquisition of certain assets and
assuming  certain  liabilities of JoEl,  Inc., the contract  manufacturer of the
lozenge product prior to October 1, 2004.

Darius was formed in January 2000 to introduce  new products to the  marketplace
through a  network  of  independent  distributors.  Darius  is a direct  selling
organization  specializing  in  proprietary  health and wellness  products.  The
continued  success of this  segment is  dependent,  among other  things,  on the
Company's ability to recruit and maintain active independent representatives; to
continue to make available new and innovative products and services; to continue
to conform with domestic and international  regulatory agencies; and to maintain
and improve  adequate system  capabilities.  The foregoing risks could result in
significant  reductions in revenues and profitability of the health and wellness
segment.

On January 2, 2001,  the Company  acquired  certain  assets and assumed  certain
liabilities  of a privately  held company  involved in the direct  marketing and
distribution  of health  and  wellness  products.  The  formation  of Darius has
provided   diversification  to  the  Company  in  both  the  method  of  product
distribution  and the broader  range of products  available  to the  marketplace
serving as a balance to the seasonal revenue cycles of the Cold-Eeze(R)  branded
products.

In January 2001, the Company formed an Ethical  Pharmaceutical  Unit,  Pharma, a
wholly-owned subsidiary of the Company, the Ethical Pharmaceutical segment, that
is under the  direction  of its  Executive  Vice  President  and Chairman of its
Medical Advisory  Committee.  The  establishment  of a dedicated  pharmaceutical
subsidiary may enable the Company to diversify into the prescription drug market
and to ensure safe and effective  distribution of these important  potential new
products  currently under  development.  The Company is at the initial stages of
what may be a lengthy process to develop the patent  applications into a line of
naturally-derived patented prescription drugs.

During 2000, the Company acquired a 60% ownership  position in Caribbean Pacific
Natural Products,  Inc. ("CPNP"). On January 22, 2003, the Company completed the
sale of the Company's  60% equity  interest in CPNP to Suncoast  Naturals,  Inc.
("Suncoast"). See discussion in Note 5, "Discontinued Operations."

The business of the Company is subject to federal and state laws and regulations
adopted  for  the  health  and  safety  of  users  of  the  Company's  products.
Cold-Eeze(R)  is a homeopathic  remedy that is subject to regulations by various
federal,  state  and  local  agencies,  including  the FDA  and the  Homeopathic
Pharmacopoeia of the United States.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The Consolidated  Financial  Statements  include the accounts of the Company and
its wholly owned subsidiaries.  All inter-company transactions and balances have
been  eliminated.  Effective March 31, 2004, the Company adopted FIN 46R and the
financial statements include  consolidated  variable interest entities "VIEs" of
which the Company is the primary beneficiary (see Note 4).

On October 1, 2004,  the Company  acquired  certain  assets and assumed  certain
liabilities  of JoEL,  Inc,  and is  accounted  for by the  purchase  method  of
accounting and accordingly,  the operating results are included in the Company's
consolidated financial statements from the date of acquisition (see Note 3).


                                       F-5




USE OF ESTIMATES

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent liabilities at the dates of the financial statements and the reported
amounts of revenues and expenses  during the reporting  periods.  Actual results
could differ from those estimates.

CASH EQUIVALENTS

The Company considers all highly liquid  investments with an initial maturity of
three  months  or less at the  time of  purchase  to be cash  equivalents.  Cash
equivalents  include cash on hand and monies invested in money market funds. The
carrying  amount  approximates  the  fair  market  value  due to the  short-term
maturity of these investments.

INVENTORIES

Inventories  are stated at the lower of cost or  market.  The  Company  uses the
first-in,  first-out  ("FIFO") method of determining  cost for all  inventories.
Inventories  included raw material,  work in progress and  packaging  amounts of
approximately $651,000 and $729,000 at December 31, 2004 and 2003, respectively,
with the remainder comprising finished goods.

PROPERTY, PLANT  AND EQUIPMENT

Property,  plant  and  equipment  are  recorded  at  cost.  The  Company  uses a
combination of straight-line and accelerated  methods in computing  depreciation
for financial reporting purposes. The annual provision for depreciation has been
computed in  accordance  with the  following  ranges of  estimated  asset lives:
building and improvements - twenty to thirty nine years; machinery and equipment
- five to seven  years;  computer  software - three  years;  and  furniture  and
fixtures - seven years.

GOODWILL AND INTANGIBLE ASSETS

Patent rights have been  amortized on a  straight-line  basis over the period of
the related  licensing  agreements  and were fully  amortized  as of March 2002.
Amortization  cost  incurred  for the year ended  December 31, 2002 was $21,940.
There were no amortization costs for the years ended December 31, 2004 and 2003.

Goodwill  is  not  amortized  but  reviewed  for  impairment   when  events  and
circumstances  indicate  the  carrying  amount may not be  recoverable  or on an
annual  basis.  In 2002,  the Company  realized an  impairment  loss of $296,047
relating to goodwill in CPNP, which was reflected in discontinued operations.

CONCENTRATION OF RISKS

Financial  instruments  that  potentially  subject  the  Company to  significant
concentrations of credit risk consist  principally of cash investments and trade
accounts receivable.

The  Company  maintains  cash and cash  equivalents  with five  major  financial
institutions.  Since the  Company  maintains  amounts  in  excess of  guarantees
provided by the Federal Depository Insurance  Corporation,  the Company performs
periodic  evaluations  of  the  relative  credit  standing  of  these  financial
institutions and limits the amount of credit exposure with any one institution.

Trade accounts receivable  potentially  subjects the Company to credit risk. The
Company  extends  credit  to its  customers  based  upon  an  evaluation  of the
customer's financial condition and credit history and generally does not require
collateral.   The  Company's  broad  range  of  customers  includes  many  large
wholesalers,  mass merchandisers and multi-outlet pharmacy chains, five of which
account for a significant  percentage of sales volume,  representing 27% for the
year ended  December 31, 2004 and 23% for the years ended  December 31, 2003 and
2002.  Customers  comprising  the  five  largest  accounts  receivable  balances
represented 48% and 34% of total trade receivable  balances at December 31, 2004
and  2003,  respectively.  During  2004  and  2003,  approximately  93% and 97%,
respectively, of the Company's revenues were generated in the United States with
the remainder being attributable to international trade.

The Company's revenues are currently generated from the sale of the Cold-Eeze(R)
product which approximated 52% of total revenue in 2004, with the remaining 2004
revenue  coming from the health and wellness,  which  approximated  46%, and the
contract  manufacturing  segments.  Should these  product  sources  terminate or
discontinue  for any reason,  the Company has  formulated a contingency  plan in
order to prevent such discontinuance from materially affecting the


                                       F-6




Company's operations.  Any such termination may, however,  result in a temporary
delay in production until the replacement facility is able to meet the Company's
production requirements.

Raw material  used in the  production of the  Cold-Eeze(R)  product is available
from numerous sources.  Currently,  it is being procured from a single vendor in
order to secure  purchasing  economies.  In a situation where this one vendor is
not able to supply the  manufacturers  with the ingredients,  other sources have
been identified.

Darius' product for resale is sourced from several suppliers.  In the event that
such sources were no longer in a position to supply Darius with  product,  other
vendors have been identified as reliable  alternatives with minimal adverse loss
of business.

LONG-LIVED ASSETS

The Company  reviews its  long-lived  assets for impairment  whenever  events or
changes in circumstances indicate that the carrying amount of the assets may not
be recoverable through future cash flows. If it is determined that an impairment
loss has occurred  based on the expected cash flows, a loss is recognized in the
Statement of Operations. In 2002, in addition to its goodwill impairment loss in
CPNP, the Company  realized an additional  impairment  loss of $337,186 from its
investment in CPNP,  which was reflected in discontinued  operations.  The total
impairment loss of $633,233 was reflected in discontinued operations.

REVENUE RECOGNITION

Sales are recognized at the time ownership is transferred to the customer, which
for the cold-remedy segment is the time the shipment is received by the customer
and for both the health and  wellness  segment  and the  contract  manufacturing
segment,  when the  product  is  shipped  to the  customer.  Sales  returns  and
allowances  are provided for in the period that the related  sales are recorded.
Provisions  for these  reserves  are based on  historical  experience.  The 2004
results  include a returns  provision  at  December  31,  2004 of  approximately
$626,000 in the event of future product returns following the discontinuation of
the  Cold-Eeze(R)  Cold  Remedy  Nasal  Spray  product in  September  2004.  The
discontinuation  negatively  impacted  net sales by  approximately  $680,000 and
resulted in an additional expense to cost of sales of approximately $672,000 due
to obsolete  product and  materials.  Total revenues for the year ended December
31, 2002  include  $148,866 as a result of the  settlement  of the  infringement
suit,  related to  licensing  fees,  against Gel Tech,  LLC,  the  developer  of
Zicam(TM), and Gum Tech International, Inc., its distributor.

SHIPPING AND HANDLING

Product  sales  relating to Health and  Wellness  products  carry an  additional
identifiable shipping and handling charge to the purchaser,  which is classified
as revenue. For the cold-remedy and contract manufacturing  segments, such costs
are included as part of the invoiced  price.  In all cases costs related to this
revenue are recorded in cost of sales.

STOCK COMPENSATION

Stock options and warrants for purchase of the Company's  common stock have been
granted to both  employees  and  non-employees  since the date of the  Company's
public  inception.   Options  and  warrants  are  exercisable  during  a  period
determined  by the  Company,  but in no event later than ten years from the date
granted.

Expense  relating to options  granted to  non-employees  has been  appropriately
recorded in the periods  presented  based on either fair values agreed upon with
the grantees or fair values as  determined  by the  Black-Scholes  pricing model
dependent upon the circumstances relating to the specific grants.

The Company used the Black-Scholes  pricing model to determine the fair value of
stock  options  granted  during  the  periods   presented  using  the  following
assumptions: expected life of the option of 5 years and expected forfeiture rate
of 0%; expected stock price  volatility of 49.8% for the year ended December 31,
2004,  ranging  between  67.9% and 120% for the year ended  December  31,  2003;
ranging between 108.0% and 119.2% for the year ended December 31, 2002; expected
dividend  yield of 0% and  risk-free  interest  rate of 3.3% for the year  ended
December 31, 2004,  expected dividend yield of 0% and risk-free interest rate of
between 3.37% and 4.5% for the year ended December 31, 2003,  expected  dividend
yield of 0% and risk-free  interest rate ranging between 4.06% and 4.51% for the
year ended  December 31, 2002.  The impact of applying  SFAS No. 123 in this pro
forma  disclosure is not indicative of the impact on future years'  reported net
income as SFAS No.  123 does not  apply to stock  options  granted  prior to the
beginning of fiscal year 1996 and additional stock options awards may be granted
in future years. All options were immediately vested upon grant.


                                       F-7




The Company  applies  Accounting  Principles  Board Opinion No. 25 ("APB 25") in
accounting  for its grants of options to employees.  Under the  intrinsic  value
method  prescribed  by APB 25, no  compensation  expense  relating  to grants to
employees has been recorded by the Company in periods reported.  If compensation
expense for awards made during the years ended December 31, 2004,  2003 and 2002
had been  determined  under the fair  value  method of  Statement  of  Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based  Compensation,"
the  Company's  net income and earnings per share would have been reduced to the
pro forma amounts indicated below:


                                                                Year Ended           Year Ended            Year Ended
                                                            December 31, 2004     December 31, 2003    December 31, 2002
                                                            -----------------     -----------------    -----------------
 Net income (loss)
    As reported                                                $   452,862            $  674,574        ($6,454,458)

 Add: Stock-based compensation expense
 included in reported net income as determined
 under the intrinsic value method                                        -                     -                  -

 Deduct: Adjustment to stock-based employee
 compensation expense as determined under the
 fair value based method                                        (2,230,000)           (2,026,720)        (2,072,220)
                                                            ---------------------- ----------------------------------------
    Pro forma net loss                                        ($ 1,777,138)          ($1,352,146)       ($8,526,678)
                                                            ---------------------- ----------------------------------------

 Basic earnings (loss) per share
    As reported                                                      $0.04                 $0.06             ($0.59)
    Pro forma                                                       ($0.15)               ($0.12)            ($0.78)
 Diluted earnings (loss) per share
    As reported                                                      $0.03                 $0.05             ($0.59)
    Pro forma                                                       ($0.15)               ($0.12             ($0.78)


Expense  relating to warrants granted to  non-employees  has been  appropriately
recorded in the periods  presented  based on either fair values agreed upon with
the grantees or fair values as  determined  by the Black  Scholes  pricing model
dependent upon the circumstances relating to the specific grants.

A total of 500,000, 424,000, and 477,000 stock options were granted to employees
and non-employees in 2004, 2003 and 2002, respectively.

ROYALTIES AND COMMISSIONS

The Company includes  royalties and founders'  commissions  incurred relating to
the  Cold  Remedy   segment,   and  commission   relating  to  the   independent
representatives of the Health and Wellness segment, as part of cost of sales. An
additional Health and Wellness segment cost, which is included in administration
expense,  relates  to the  Company's  agreement  with the  former  owners of the
Utah-based direct marketing and selling company,  whereby they receive payments,
currently totaling 5% of net sales collected,  for use of product  formulations,
consulting,  confidentiality and non-compete  agreements with such expense being
expensed  as  incurred.   Commission  expense  related  to  independent  brokers
associated with the cold remedy and contract  manufacturing segments is included
in administration expenses.

ADVERTISING

Advertising  costs are  expensed  within the period in which they are  utilized.
Advertising  expense is  comprised  of media  advertising,  presented as part of
sales and marketing expense; co-operative advertising, which is accounted for as
part of net sales;  and free product,  which is accounted for as part of cost of
sales.  Advertising  costs incurred for the years ended December 31, 2004,  2003
and 2002 were $6,584,600, $5,483,465, and $4,794,955,  respectively. Included in
prepaid  expenses and other  current  assets was $41,375 and $68,000 at December
31, 2004 and 2003 relating to prepaid advertising and promotion expenses.

RESEARCH AND DEVELOPMENT

Research and development costs are charged to operations in the period incurred.
Expenditures  for the  years  ended  December  31,  2004,  2003  and  2002  were
$3,232,569,  $3,365,698,  $2,663,291,  respectively.  Principally,  research and
development  costs are related to Pharma's study activities and costs associated
with Cold-Eeze(R).


                                       F-8




INCOME TAXES

The  Company  utilizes  an asset  and  liability  approach  which  requires  the
recognition  of  deferred  tax  assets  and   liabilities  for  the  future  tax
consequences  of events that have been  recognized  in the  Company's  financial
statements or tax returns.  In estimating future tax  consequences,  the Company
generally  considers all expected future events other than enactments of changes
in the tax law or rates. Until sufficient taxable income to offset the temporary
timing   differences   attributable   to  operations   and  the  tax  deductions
attributable to option,  warrant and stock  activities are assured,  a valuation
allowance equaling the total deferred tax asset is being provided. See Note 14 -
Income Taxes for further discussion.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Cash  and  cash  equivalents,  accounts  receivable  and  accounts  payable  are
reflected  in the  consolidated  financial  statements  at carrying  value which
approximates fair value because of the short-term maturity of these instruments.
The fair value of long-term  debt was  approximately  equivalent to its carrying
value due to the fact that the interest rates currently available to the Company
for debt with similar terms are  approximately  equal to the interest  rates for
its existing debt.  Determination of the fair value of related party payables is
not practicable due to their related party nature.

RECENTLY ISSUED ACCOUNTING STANDARDS

In December 2003, the Financial Accounting Standards Board (FASB or the "Board")
issued FASB  INTERPRETATION  NO. 46 (REVISED  DECEMBER 2003),  CONSOLIDATION  OF
VARIABLE INTEREST ENTITIES (FIN 46R), to address certain  implementation issues.
FIN 46R varies  significantly from FASB Interpretation No. 46,  CONSOLIDATION OF
VARIABLE INTEREST  ENTITIES (FIN 46), which it supersedes.  FIN 46R requires the
application  of either FIN 46 or FIN 46R by  "Public  Entities"  to all  Special
Purpose  Entities  ("SPEs") at the end of the first interim or annual  reporting
period  ending after  December 15, 2003.  FIN 46R is  applicable to all non-SPEs
created prior to February 1, 2003 by Public Entities that are not small business
issuers at the end of the first interim or annual  reporting period ending after
March 15, 2004. The Company has determined that  Scandasystems,  a related party
(see Notes 4 and 16),  qualifies as a variable interest entity and was initially
consolidated  beginning  with the quarter ended March 31, 2004.  Due to the fact
that the Company has no long-term  contractual  commitments or  guarantees,  the
maximum exposure to loss is insignificant.

On  December  16,  2004,  the FASB  issued  STATEMENT  NO. 123  (REVISED  2004),
SHARE-BASED  PAYMENT  (STATEMENT  123(R)),  which  replaces  Statement  No. 123,
"Accounting  for Stock-Based  Compensation,"  and supersedes APB Opinion No. 25,
"Accounting  for Stock  Issued to  Employees."  Statement  123 (R)  requires all
companies to measure  compensation cost for all share-based  payments (including
employee  stock  options) at fair value and  recognize the cost in the financial
statements  beginning  with the first  interim or annual  reporting  period that
begins after June 15, 2005. The pro forma disclosures previously permitted under
Statement  123  will  no  longer  be  an  alternative  to  financial   statement
recognition. The Company is required to adopt Statement 123(R) beginning July 1,
2005.  This  statement  applies to all awards granted after the date of adoption
and  to  awards  modified,  repurchased,  or  cancelled  after  that  date.  The
cumulative  effect  of  initially  applying  Statement  123(R),  if any  will be
recognized as of the date of adoption.

The Company is required to apply  Statement  123(R) using a modified  version of
prospective  application.  Under that transition  method,  compensation  cost is
recognized  on or after the date of  adoption  for the  portion  of  outstanding
awards, for which the requisite service has not yet been rendered,  based on the
grant-date  fair value of those awards  calculated  under  Statement 123 for pro
forma  disclosures.  For periods  before the date of  adoption,  the Company may
elect to apply a  modified  version of  retrospective  application  under  which
financial  statements for prior periods are adjusted on a basis  consistent with
the pro forma  disclosures  required  for those  periods by  Statement  123. The
Company is currently  evaluating the impact of the statement,  but does not plan
to retrospectively apply this statement.

In November 2004, the FASB issued SFAS No. 151,  "INVENTORY COSTS" ("SFAS 151").
SFAS 151 amends the guidance in Chapter 4 of  Accounting  Research  Bulletin No.
43,  "Inventory  Pricing" to clarify the accounting for amounts of idle facility
expense,  freight,  handling costs and wasted  material.  SFAS 151 requires that
these types of items be recognized as current period charges as they occur.  The
provisions of SFAS 151 are effective for inventory  costs incurred during fiscal
years  beginning  after June 15,  2005.  The  adoption  of this  standard is not
expected to have an impact on the  Company's  consolidated  financial  position,
results of operations or cash flows.

NOTE 3 - ACQUISITIONS

On October 1, 2004, the Company acquired certain assets of JoEL, Inc,  including
inventory,  land,  buildings,  machinery  and  equipment  of  two  manufacturing
facilities  located in Lebanon  and  Elizabethtown,  Pennsylvania,  and  assumed
certain liabilities.  The acquisition cost was approximately $5.2 million, which
consisted of $1.2 million in cash,


                                       F-9




transaction  costs of  $113,671,  a $3.0  million term loan (see Note 8) and the
issuance of 113,097  common shares of The Quigley  Corporation  in the amount of
$895,449, net of registration fees of $81,709.

The fair  value of these  long-lived  assets  were as of  October  1,  2004,  as
determined by accredited independent third parties.

The fair value of the common stock issued of $8.64 per share was  determined  by
averaging  the closing price for four business days before and after the closing
date of October 1, 2004,  resulting in a value to the shares  issued of $977,158
less registration costs of $81,709.

The fair value of assets  acquired  and  liabilities  assumed at October 1, 2004
follow:

                                                      Allocated         Unallocated
                                                     Excess Fair        Excess Fair
                                                       Value               Value
                                                    -----------         -----------

Inventory                                           $   900,000         $   900,000
Land                                                    386,588             528,000
Buildings and improvements                              982,578           1,342,000
Machinery and equipment                               2,933,089           4,006,000
Furniture and fittings                                   58,574              80,000
                                                    -----------         -----------
                                                      5,260,829           6,856,000

Liabilities assumed                                     (70,000)            (70,000)

                                                    -----------         -----------
Excess of net fair value over purchase price                 --          (1,595,171)
                                                    -----------         -----------

                                                    $ 5,190,829         $ 5,190,829
                                                    ===========         ===========

The sum of the assets acquired and liabilities  assumed exceeded the cost of the
acquired assets (excess fair value over cost). This excess is allocated as a pro
rata reduction of the amounts that otherwise  would have been assigned to all of
the long-lived acquired assets.

The  acquisition  was  executed  in  order to  ensure  that  the  integrity  and
formulation  of the  Cold-Eeze(R)  products  remained  under the  control of the
Company  and  the  assurance  of a  continued  supply  of  Cold-Eeze(R)  to  the
marketplace. This is an FDA approved facility with available capacity for future
product development and manufacture.

PRO FORMA RESULTS.  The following  unaudited pro forma information  presents the
results of operations of the Company as if the JoEl  acquisition had occurred at
the beginning of the periods shown. The pro forma information,  however,  is not
necessarily   indicative  of  the  results  of  operations   assuming  the  JoEl
acquisition  had occurred at the beginning of the periods  presented,  nor is it
necessarily indicative of future results.


                                                                       Year Ended
                                                              --------------------------------
                                                              December 31,        December 31,
                                                                  2004                2003
                                                              --------------------------------
                                                              (Unaudited)        (Unaudited)

 AS REPORTED
     Total Revenue                                            $43,947,995        $41,499,163

     Income from continuing operations                            452,862            728,923

     Income from continuing operations - basic
        earnings per common share                                   $0.04              $0.06


 PRO FORMA
     Total Revenue                                            $45,784,627        $44,987,013

     (Loss)/income from continuing operations                     (88,368)           934,452

     (Loss)/income from continuing operations -
        basic (loss)/earnings per common share                     ($0.01)             $0.08


                                      F-10




NOTE 4 -  VARIABLE INTEREST ENTITY

In December 2003, the Financial Accounting Standards Board (FASB or the "Board")
issued FASB  Interpretation  No. 46 (revised  December 2003),  CONSOLIDATION  OF
VARIABLE INTEREST ENTITIES (FIN 46R), to address certain  implementation issues.
FIN 46R varies  significantly from FASB Interpretation No. 46,  CONSOLIDATION OF
VARIABLE  INTEREST  ENTITIES ("VIE") (FIN  46),  which  it  supersedes.  FIN 46R
requires the application of either FIN 46 or FIN 46R by "Public Entities" to all
Special  Purpose  Entities  ("SPEs")  at the end of the first  interim or annual
reporting  period ending after  December 15, 2003.  FIN 46R is applicable to all
non-SPEs created prior to February 1, 2003 by Public Entities that are not small
business  issuers  at the end of the first  interim or annual  reporting  period
ending after March 15, 2004.

Effective  March 31, 2004, the Company adopted FIN 46R for VIE's formed prior to
February 1, 2003.  The  Company has  determined  that  Scandasystems,  a related
party,  qualifies as a variable interest entity and the Company has consolidated
Scandasystems  beginning  with the quarter ended March 31, 2004. Due to the fact
that the Company has no long-term  contractual  commitments or  guarantees,  the
maximum exposure to loss is insignificant.  As a result of consolidating the VIE
of which the  Company is the  primary  beneficiary,  the  Company  recognized  a
minority interest of approximately  $54,980 on the Consolidated Balance Sheet at
December 31, 2004 which  represents  the  difference  between the assets and the
liabilities recorded upon the consolidation of the VIE.

The liabilities recognized as a result of consolidating the VIE do not represent
additional claims on the Company's general assets. Rather, they represent claims
against  the  specific  assets  of  the  consolidated  VIE.  Conversely,  assets
recognized as a result of  consolidating  this VIE do not  represent  additional
assets  that could be used to  satisfy  claims  against  the  Company's  general
assets.  Reflected on the Company's December 31, 2004 Consolidated Balance Sheet
are $96,051 of VIE assets,  representing  all of the assets of the VIE.  The VIE
assists  the  Company  in  acquiring   licenses  and  research  and  development
activities in certain countries.

NOTE 5 - DISCONTINUED OPERATIONS

In December 2002, the Board of Directors of the Company  approved a plan to sell
CPNP, which was originally acquired in July 2000. On January 22, 2003, the Board
of  Directors  of the Company  completed  the sale of the  Company's  60% equity
interest in CPNP to Suncoast.  In exchange for its 60% equity  interest in CPNP,
the Company  received  750,000  shares of  Suncoast's  common  stock and 100,000
shares of Suncoast's Series A Redeemable Preferred Stock, which bear interest at
a rate of 4.25% per annum and which is redeemable  from time to time after March
31,  2003 in such  amounts as is equal to 50% of the free cash flow  reported by
Suncoast in the immediately  preceding quarterly financial statements divided by
the redemption price of $10.00 per share.  Following the purchase by Suncoast of
the Company's 60% equity  interest in CPNP the Company owned 19.5% of Suncoast's
issued and  outstanding  capital  stock valued at $79,365,  which  investment is
accounted for on the cost basis method,  representing the Company's share of the
fair value of Suncoast at the time the transaction was recorded.

In September 2004, the Company  declared a  dividend-in-kind  to stockholders of
499,282  shares of  Suncoast's  common stock (see Note 11) and  accordingly  the
investment  value has been  reduced to $26,455 at December  31,  2004,  which is
included in Other  Assets in the  Consolidated  Balance  Sheet.  At December 31,
2004, the Company owned  approximately  5% of Suncoast's  issued and outstanding
capital stock, which investment is accounted for on the cost basis method.

Sales of CPNP for all periods  commencing on the date of  acquisition on July 1,
2000 up to date of disposal on January 22, 2003, were $5,075,472, cumulative net
losses  during  that  period  were  $2,232,620.  The loss  includes an amount of
$633,233  relating to the asset impairment,  reported in 2002.  Revenues of CPNP
for the years  ended  December  31, 2003 and 2002 were  $59,824 and  $2,040,312,
respectively,  net losses for the same  periods  were  $54,349  and  $1,322,355,
respectively.  Results of CPNP are presented as  discontinued  operations in the
Consolidated Statements of Operations.

NOTE 6 - PROPERTY, PLANT AND EQUIPMENT

Consisted of the following as of:       December 31, 2004      December 31, 2003
                                        -----------------      -----------------

     Land                                      $  538,791             $  152,203
     Buildings and improvements                 2,496,536              1,513,958
     Machinery and equipment                    4,542,645              1,432,818
     Computer software                            459,557                570,001
     Furniture and fixtures                       253,574                195,000
                                        -----------------      -----------------
                                                8,291,103              3,863,980
     Less: Accumulated  depreciation            1,817,415              1,445,821
                                        -----------------      -----------------
     Property, Plant and Equipment, net        $6,473,688             $2,418,159
                                        =================      =================


                                      F-11




Depreciation  expense for the years ended  December 31, 2004,  2003 and 2002 was
$622,348, $473,593, and $387,128,  respectively.  During the year ended December
31, 2004, the Company retired  equipment with an original cost of  approximately
$152,000 and accumulated depreciation of approximately $126,000.

NOTE 7 - PATENT RIGHTS AND RELATED ROYALTY COMMITMENTS

During 1996,  the Company  entered into a licensing  agreement  resulting in the
utilization of the zinc gluconate  patent. In return for the acquisition of this
license,  the Company  issued a total of 240,000  shares of common  stock to the
patent holder and attorneys during 1996 and 1997. The related  intangible asset,
approximating $490,000, was valued at the fair value of these shares at the date
of the grant.  This asset value was  amortized  over the  remaining  life of the
patent that expired in March 2002.  The Company was required to pay a 3% royalty
on sales collected, less certain deductions, to the patent holder throughout the
term of this agreement, which also expired in 2002.

The Company has maintained a separate  representation and distribution agreement
relating to the development of the zinc gluconate  glycine product  formulation.
In return for exclusive  distribution rights, the Company must pay the developer
a 3% royalty and a 2%  consulting  fee based on sales  collected,  less  certain
deductions,  throughout  the term of this  agreement,  which is due to expire in
2007. However, the Company and the developer are in litigation (see Note 10) and
as such no  potential  offset  from such  litigation  for  these  fees have been
recorded. A founder's  commission totaling 5%, on sales collected,  less certain
deductions,  is  paid  to  two of the  officers,  who  are  also  directors  and
stockholders of the Company, and whose agreements expire in 2005, (see Note 16).

In August 2003,  the Company  entered into a licensing  agreement  with a patent
holder  relating to utilizing a nasal spray product in the treatment of symptoms
of the common cold.  The Company  agreed to pay the patent  holder a two percent
royalty  on  net  sales  of  nasal  spray  products,  less  certain  deductions,
throughout the term of this agreement, expiring no later than April 2014. As the
nasal  spray  product  has now been  discontinued,  no further  obligations  are
expected to materialize in relation to this agreement.

The expenses for the respective periods relating to such agreements  amounted to
$2,058,965,  $1,805,294,  and $1,421,475, for the years ended December 31, 2004,
2003 and 2002, respectively.  Amounts accrued for these expenses at December 31,
2004 and 2003 were $1,129,654 and $915,109, respectively.

Amounts  included  in accrued  royalties  and sales  commissions  in the balance
sheets at December  31, 2004 and 2003,  apportioned  between  related  party and
other balances, are as follows:

                                                         2004      2003
                                                     ----------------------
     Related party balances (see Note 16)            $  459,583  $  456,748
     Other non-related party balances                 1,336,498   1,137,709
                                                     ----------------------
     Total accrued royalties and sales commissions   $1,796,081  $1,594,457
                                                     ----------------------


NOTE 8 - LONG-TERM DEBT

In connection  with the Company's  acquisition in October 2004 (see Note 3), the
Company  entered  into a  term-loan  in the amount of $3 million  payable to PNC
Bank, N.A. which is collateralized by mortgages on real property located in each
of Lebanon and Elizabethtown,  Pennsylvania. The Company can elect interest rate
options at either the Prime  Rate or LIBOR  plus 200 basis  points.  The loan is
payable in eighty-four  equal monthly principal  payments of $35,714  commencing
November 1, 2004. The Company is in compliance  with all related loan covenants.
At December 31,  2004,  the entire loan balance was under a six month LIBOR rate
of 4.17%, maturing on March 31, 2005.

The schedule of principal payments of long-term debt is as follows:

            December 31,
            2005                                  $428,571
            2006                                   428,571
            2007                                   428,571
            2008                                   428,571
            2009                                   428,571
            Thereafter                             750,002
                                                 ----------
                                                 2,892,857
            Less - current portion                (428,571)
                                                 ----------
                                                $2,464,286
                                                 ==========


                                      F-12




NOTE 9 - OTHER CURRENT LIABILITIES

Included in other  current  liabilities  are $717,038  and  $458,359  related to
accrued compensation at December 31, 2004 and 2003, respectively.

NOTE 10 - COMMITMENTS AND CONTINGENCIES

Certain  operating  leases for  office and  warehouse  space  maintained  by the
Company resulted in rent expense for the years ended December 31, 2004, 2003 and
2002,  of  $335,226,  $255,078,  and  $236,304,  respectively.  The  Company has
approximate future obligations over the next five years as follows:

                                        Property
                      Research and      and Other
          Year        Development         Leases         Advertising          Other             Total
         -----------------------------------------------------------------------------------------------
          2005        $1,100,000        $  188,000        $  649,000        $  207,000        $2,144,000
          2006                --           136,000                --                --           136,000
          2007                --            64,000                --                --            64,000
          2008                --                --                --                --                --
          2009                --                --                --                --                --
         -----------------------------------------------------------------------------------------------
         Total        $1,100,000        $  388,000        $  649,000        $  207,000        $2,344,000
         -----------------------------------------------------------------------------------------------

Additional  advertising  and research and  development  costs are expected to be
incurred during the remainder of 2005.

The Company has an  agreement  with the former  owners of the Utah based  direct
marketing and selling company, whereby they receive payments, currently totaling
5% of  net  sales  collected,  for  use  of  product  formulations,  consulting,
confidentiality and non-compete  agreements.  Amounts paid or payable under such
agreement  during the twelve months  periods ended  December 31, 2004,  2003 and
2002 were $800,881, $880,091 and $678,454,  respectively.  Amounts payable under
such  agreement  at December  31, 2004 and  December  31, 2003 were  $60,876 and
$68,388, respectively.

The Company has several licensing and other contractual agreements, see Note 7.

                                TESAURO AND ELEY

In September  2000, the Company was sued by two  individuals  (Jason Tesauro and
Elizabeth Eley, both residents of Georgia), on behalf of a "nationwide class" of
"similarly  situated  individuals," in the Court of Common Pleas of Philadelphia
County,  Pennsylvania.  The  Complaint  alleges  that the  Plaintiffs  purchased
certain Cold-Eeze(R)  products between August,  1996, and November,  1999, based
upon  cable  television,  radio  and  internet  advertisements  which  allegedly
misrepresented  the  qualities  and  benefits  of the  Company's  products.  The
Complaint   requests  an  unspecified   amount  of  damages  for  violations  of
Pennsylvania's   consumer   protection   law,  breach  of  warranty  and  unjust
enrichment, as well as a judicial determination that the action be maintained as
a class action.

In October  2000,  the Company  filed  Preliminary  Objections  to the Complaint
seeking dismissal of the action.  The Court sustained certain objections thereby
narrowing  Plaintiffs'  Complaint.  In May  2001,  Plaintiffs  filed a Motion to
Certify the Alleged Class. The Company opposed the Motion. In November 2001, the
Court held a hearing on Plaintiffs' Motion for Class  Certification.  In January
2002, the Court denied in part and granted in part the Plaintiffs'  Motion.  The
Court denied  Plaintiffs'  Motion to Certify a Class based on Plaintiffs'  claim
under the Pennsylvania Consumer Protection Law; however, the Court certified the
class based on Plaintiffs' breach of warranty and unjust enrichment claims

Discovery  has been  completed and trial that was  originally  scheduled for May
2004 has been continued pending  determination of certain dispositive  pre-trial
motions filed by the Company.

The  Corporation  believes  Defendant's  claims  are  without  merit,  and it is
vigorously  defending the claims.  Based upon the information the Company has at
this  time,  it  believes  the  action  will not have a  material  impact to the
Company. However, at this time no prediction as to the outcome can be made.

                          LITIGATION - FORMER EMPLOYEE

On April 12, 2002,  the Company  commenced a complaint in Equity in the Court of
Common  Pleas of Bucks  County,  PA  against  the  former  President  of  Darius
International Inc., its wholly owned subsidiary, following termination of such


                                      F-13




President.  The allegations in the complaint include, but are not limited to, an
alleged  breach of fiduciary  duty owed to the  Company.  The Company is seeking
both  injunctive  and monetary  relief.  On or about May 1, 2002,  the defendant
filed a counterclaim  requesting  that the Court declare him the lawful owner of
55,000 stock options,  unspecified  damages  relating to an alleged breach of an
oral contract and for  commissions  allegedly  owed. In addition,  the Defendant
requests  the return of  certain  intellectual  property  used to  commence  and
continue Darius' operations.

The  Corporation  believes  Defendant's  claims  are  without  merit,  and it is
vigorously  defending the  counterclaims  and is  prosecuting  its action on its
complaint.  Based upon the information the Company has at this time, it believes
the action will not have a material impact to the Company. However, at this time
no prediction as to the outcome can be made.

                  PAIGE D. DAVISON VS. THE QUIGLEY CORPORATION

On  February  26,  2004,  the  plaintiff  filed an action  against  The  Quigley
Corporation  (the  "Company"),  which was not served  until  April 5, 2004.  The
action  alleges that the  plaintiff  suffered  certain  losses and injuries as a
result of using the Company's nasal spray product.  Among the allegations of the
plaintiff  are that the nasal spray was defective  and  unreasonably  dangerous,
lacked proper and adequate warnings and/or instructions, and was not fit for the
purposes and uses intended.

The Company has  investigated the claims and believes they are without merit. At
the  present  time,  the matter is being  defended  by the  Company's  liability
insurance carrier.

The Company  believes  plaintiff's  claims are without  merit and is  vigorously
defending those claims. Based upon the information the Company has at this time,
it believes the action will not have a material impact to the Company.  However,
at this time no prediction as to the outcome can be made.

                       POLSKI VS. THE QUIGLEY CORPORATION.

On August 12, 2004, plaintiff filed an action against The Quigley Corporation in
the District Court for Hennepin  County,  Minnesota,  which was not served until
September 2, 2004. The action alleges that plaintiff suffered certain losses and
injuries as a result of the Company's nasal spray product. Among the allegations
of plaintiff are negligence,  products liability,  alleged breach of express and
implied  warranties,  and an  alleged  breach of the  Minnesota  Consumer  Fraud
Statute.

The  Company  has  investigated  the claims and  believes  that they are without
merit.  At the  present  time,  the matter is being  defended  by the  Company's
insurance carrier.

The Company  believes  plaintiff's  claims are without  merit and is  vigorously
defending those claims. Based upon the information the Company has at this time,
it believes the action will not have a material impact to the Company.  However,
at this time no prediction as to the outcome can be made.

      ANGELFIRE, ARVIN, BELL, BROWN, EDWARDS, HOHNSTEIN, HOFFMAN, LAURENT,
                  MARTIN, RICHARDSON, RIGSBY, SEONE, SMALLEY,
              VAN BENTHEM AND WILLIAMS VS. THE QUIGLEY CORPORATION

On November 4, 2004, seven (7) plaintiffs filed an action in the Court of Common
Pleas of Bucks  County,  Pennsylvania,  against  The  Quigley  Corporation.  The
complaint  was  amended  on  March  11,  2005  to add an  additional  eight  (8)
plaintiffs in the action.  The action alleges that plaintiffs  suffered  certain
losses and  injuries as a result of using the  Company's  nasal  spray  product.
Among the  allegations of plaintiffs are claims that The Quigley  Corporation is
liable to them based on alleged  negligence,  alleged strict products  liability
(failure to warn and  defective  design),  alleged  breach of express  warranty,
alleged breach of implied warrant,  and an alleged violation of the Pennsylvania
Unfair Trade Practices and Consumer Protection Law and other Consumer Protection
Statutes.

At the present time,  the matter is being  defended by the  Company's  insurance
carrier.  An answer  stating  affirmative  defenses  has been  filed.  Pre-trial
discovery is being scheduled.

The Company  believes  plaintiffs'  claims are without  merit and is  vigorously
defending those claims. Based upon the information the Company has at this time,
it believes the action will not have a material impact to the Company.  However,
at this time no prediction as to the outcome can be made.


                                      F-14




               THE QUIGLEY CORPORATION VS. JOHN C. GODFREY, ET AL.

This action was commenced in November 2004 in the Court of Common Pleas of Bucks
County,  Pennsylvania.  In that action,  the Company is seeking  declaratory and
injunctive  relief  against John C.  Godfrey,  Nancy Jane  Godfrey,  and Godfrey
Science and Design, Inc. requesting injunctive relief regarding the Cold-Eeze(R)
trade  name  and  trademark;   injunctive   relief  regarding  the  Cold-Eeze(R)
formulations and  manufacturing  methods and injunctive relief for breach of the
duty of loyalty.  The  Company's  Complaint is based in part upon the  Exclusive
Representation and Distribution Agreement and the Consulting Agreement (together
the  "Agreements")  entered into  between the  defendants  and the Company.  The
Company terminated the Agreements for the defendants'  alleged material breaches
of  the  Agreements.   Defendants  have  answered  the  complaint  and  asserted
counterclaims  against the Company seeking remedies  relative to the Agreements.
The Company has moved to dismiss  portions of defendant's  counterclaims  on the
grounds that they are without merit.

The  Corporation  believes  Defendant's  claims  are  without  merit,  and it is
vigorously  defending the  counterclaims  and is  prosecuting  its action on its
complaint.  Based upon the information the Company has at this time, it believes
the action will not have a material impact to the Company. However, at this time
no prediction as to the outcome can be made.

            AXIS SPECIALTY INSURANCE CO. VS. THE QUIGLEY CORPORATION

This action,  filed in January 2005 in the Federal  Eastern  District  Court for
Pennsylvania,  stems from a dispute  between  the  Company and one of its excess
liability insurance carriers,  who seeks a judicial declaration of its insurance
coverage  obligations  under a  policy  which  terminates  in  March  2005.  The
carrier's  action follows a complaint by the Company filed in December 2004 with
the Pennsylvania  Insurance Commission,  which ultimately sided with the Company
in determining that the carrier failed to observe proper notification procedures
when it first sought to limit,  or  alternatively,  to insure at a substantially
higher premium,  its coverage  obligations.  This action seeks to deny insurance
coverage for certain  product  liability  claims based on  occurrences  prior to
April 6, 2004.

The Company has filed a  counterclaim  requesting  a  declaration  of  insurance
coverage under the insurance policy referenced above. The litigation potentially
affects  the amount of the  Company's  liability  coverage  for the nasal  spray
personal injury litigation described above.

The Company  believes  plaintiffs'  claims are without  merit and is  vigorously
defending those claims. Based upon the information the Company has at this time,
it believes the action will not have a material impact to the Company.  However,
at this time no prediction as to the outcome can be made.

                TERMINATED LEGAL PROCEEDINGS - GOLDBLUM AND WAYNE

An action was  commenced on March 17, 1996 by Goldblum and Wayne in the Court of
Common Pleas of Montgomery  County alleging that the plaintiffs became owners of
500,000 shares each of the Company's common stock in or about 1990 and requested
damages in excess of $100,000 for breach of contract and conversion. The Company
vigorously defended this lawsuit through trial during January 2004 when the jury
returned a unanimous verdict in favor of the Company.  Plaintiffs filed a Motion
for Post Trial  Relief with the Court of Common Pleas of  Montgomery  County but
failed to produce a record or file a Brief in Support of their Motion within the
timelines called for by the Pennsylvania  Rules of Civil Procedure.  The Quigley
Corporation has taken judgment on the verdict in its favor and the appeal period
has expired. This action is now concluded.

NOTE 11 - TRANSACTIONS AFFECTING STOCKHOLDERS' EQUITY

On  September 8, 1998,  the  Company's  Board of  Directors  declared a dividend
distribution of Common Stock Purchase Rights (the "Rights"),  thereby creating a
Stockholder  Rights  Plan  (the  "Plan").   The  dividend  was  payable  to  the
stockholders   of  record  on  September  25,  1998.  Each  Right  entitles  the
stockholder  of record to purchase from the Company that number of Common Shares
having a combined  market value equal to two times the Rights  exercise price of
$45. The Rights are not exercisable  until the distribution  date, which will be
the earlier of a public  announcement  that a person or group of  affiliated  or
associated persons has acquired 15% or more of the outstanding common shares, or
the announcement of an intention to make a tender or exchange offer resulting in
the  ownership of 15% or more of the  outstanding  common  shares by a similarly
constituted  party.  The dividend has the effect of giving the stockholder a 50%
discount on the share's  current market value for exercising  such right. In the
event of a cashless  exercise of the Right,  and the acquirer has acquired  less
than a 50% beneficial  ownership of the Company,  a stockholder may exchange one
Right for one common share of the Company.  The Final  Expiration of the Plan is
September 25, 2008.


                                      F-15


Since the inception of the stock buy-back program in January 1998, the Board has
subsequently  increased  the  authorization  on  five  occasions,  for  a  total
authorized  buy-back of 5,000,000  shares or  approximately  38% of the previous
shares  outstanding.  Such shares are  reflected  as treasury  stock and will be
available for general corporate purposes.  From the initiation of the plan until
December  31,  2004,  4,159,191  shares  have  been  repurchased  at a  cost  of
$24,042,801  or an average cost of $5.78 per share.  No shares were  repurchased
during 2004, 2003 or 2002.

As a result of the  litigation  relating to the case against  Nutritional  Foods
Corporation,  in March of 1998, a subsequent  order of the Court of Common Pleas
of Bucks County  modified the decree of January 23, 1997 to provide for a return
to treasury of 604,928  shares to the  Company.  As payment for legal  services,
118,066 of these  shares  were  reissued  with a market  value of  approximately
$1,145,358.  This value, the cost of reacquiring  these shares,  then became the
value of the net treasury stock ($2.35 per share)  represented by 486,862 shares
returned to treasury.

On April 9,  2002,  The  Quigley  Corporation  entered  into an  agreement  with
Forrester  Financial  LLC,  ("Forrester")  providing  for  Forrester to act as a
financial  consultant to the Company.  The consulting  agreement commenced as of
March 7, 2002 for a term of twelve months,  but may be terminated by the Company
in its sole discretion at any time. As compensation  for services to be provided
by Forrester to the Company, the Company granted to Forrester, or its designees,
warrants to purchase up to a total of 1,000,000  shares of the Company's  common
stock. The Company's  financial  statements reflect a $1,125,000 non-cash charge
in 2002  resulting  from the  granting and  exercising  of these  warrants.  The
warrants have three exercise prices,  500,000 warrants  exercisable at $6.50 per
share,  which were exercised in May 2002 resulting in cash to the Company in the
amount of  $3,250,000,  250,000  warrants  exercisable  at $8.50 per share,  and
250,000  warrants  exercisable at $11.50 per share.  The warrants were initially
exercisable  until  the  earlier  to  occur  of (i)  March  6,  2003 or (ii) the
termination of the Consulting Agreement.

On December 7, 2002, Forrester commenced an action by a Writ of Summons filed in
the Court of Common Pleas of Bucks County,  PA against The Quigley  Corporation.
No Complaint  was filed  detailing  the claim of  Forrester  against The Quigley
Corporation.  This action was terminated  with prejudice by Forrester as part of
its Amended and Restated  Warrant  Agreement (the "Amended  Agreement)  with The
Quigley  Corporation  on February 2, 2003  whereby  certain  warrants  that were
scheduled to expire on March 7, 2003 were extended to March 7, 2004 (warrants to
purchase 250,000 shares at $8.50; warrants to purchase 250,000 shares at $11.50)
are  no  longer  cancelable  by the  Company.  As an  additional  part  of  this
agreement, Forrester was granted warrants to purchase 250,000 shares at any time
until March 7, 2004 at the price of $9.50 a share.  As a result of this  Amended
Agreement  the  Company  recorded a further  non-cash  charge of $975,000 in the
fourth quarter of 2002,  amounting to a total expense of $2,100,000,  classified
as administrative expense in the Consolidated Statement of Operations,  relating
to this warrant agreement in 2002.

In July 2004,  the Company  announced that its Board of Directors had approved a
distribution-in-kind  to its  stockholders  of  approximately  500,000 shares of
common stock of Suncoast Naturals, Inc. (OTCBB: SNTL), which it acquired through
a sale of the  Company's  60%  equity  interest  in  Caribbean  Pacific  Natural
Products, Inc. These shares were distributed on the basis of approximately .0434
shares of Suncoast  common  stock for each share of the  Company's  common stock
owned of record on September 1, 2004, with fractional  shares paid in cash. As a
result of the Company's  dividend-in-kind  to  stockholders  and the issuance of
499,282  shares of common  stock of  Suncoast  in  September  2004 (see Note 5),
representing  approximately  two-thirds  of  its  common  stock  ownership,  the
remaining  250,718  shares,  owned by the Company are valued at $26,455 and such
amount is included in Other Assets in the Consolidated Balance Sheet at December
31, 2004.  This  transaction  was  completed in  September  2004  resulting in a
dividend-in-kind distribution of $260,000 which represents the fair value of the
asset  transferred  and is reflected  as a reduction of retained  earnings and a
related  gain on the  dividend of stock of $198,786  which is  reflected  on the
Statement of Operations.

On October 1, 2004, the Company issued 113,097 shares of its common stock to the
stockholders  of JoEL,  Inc., in order to satisfy the common stock  component of
acquiring  certain assets and assuming  certain  liabilities of JoEl,  Inc. (see
Note 3)

NOTE 12 - STOCK COMPENSATION

Stock  options for purchase of the  Company's  common stock have been granted to
both  employees  and  non-employees.  Options  are  exercisable  during a period
determined  by the  Company,  but in no event later than ten years from the date
granted.

On December  2, 1997,  the  Company's  Board of  Directors  approved a new Stock
Option Plan ("Plan")  which was amended in 2001 and provides for the granting of
up to three million shares to employees.  Under this Plan, the Company may grant
options  to  employees,  officers  or  directors  of  the  Company  at  variable


                                      F-16


percentages  of the  market  value of stock at the date of grant.  No  incentive
stock option shall be exercisable more than ten years after the date of grant or
five years where the individual owns more than ten percent of the total combined
voting power of all classes of stock of the Company.  Stockholders  approved the
Plan in 1998. A total of 500,000, 424,000 and 477,000 options were granted under
this Plan during the years ended December 31, 2004, 2003 and 2002, respectively.

A summary of the status of the Company's  stock options and warrants  granted to
both  employees  and  non-employees  as of December 31, 2004,  2003 and 2002 and
changes during the years then ended is presented below:


YEAR ENDED DECEMBER 31, 2004:


                                               EMPLOYEES               NON-EMPLOYEES                   TOTAL
                                    ----------------------------    ---------------------     ------------------------
                                                        Weighted                  Weighted                     Weighted
                                                        Average                   Average                      Average
                                        Shares          Exercise     Shares       Exercise     Shares          Exercise
                                        (,000)            Price      (,000)         Price      (,000)           Price
                                    -----------------------------------------------------------------------------------
Options/warrants  outstanding
   at  beginning of period               3,486        $    4.82      1,115        $    9.38      4,601        $    5.92
Additions/deductions:
  Granted                                  420             9.50         80             9.50        500             9.50
  Exercised                                 26             1.98         --               --         26             1.98
  Cancelled                                 --               --        750             9.83        750             9.83
                                    -----------------------------------------------------------------------------------
Options/warrants  outstanding
   at end of period                      3,880        $    5.35        445        $    8.64      4,325        $    5.68
                                    -----------------------------------------------------------------------------------
Options/warrants  exercisable
   at end of period                      3,880                         445                       4,325
                                    ===================================================================================

Weighted average fair value of
   Grants                                $4.46                       $4.46                       $4.46

Price range of options/warrants:
   Exercised                          $0.81-$5.19                      --                     $0.81-$5.19

   Outstanding                        $0.81-$10.00                $0.81-$10.00                $0.81-$10.00

   Exercisable                        $0.81-$10.00                $0.81-$10.00                $0.81-$10.00



YEAR ENDED DECEMBER 31, 2003:

                                               EMPLOYEES               NON-EMPLOYEES                   TOTAL
                                    ----------------------------    ---------------------     ------------------------
                                                        Weighted                  Weighted                     Weighted
                                                        Average                   Average                      Average
                                        Shares          Exercise     Shares       Exercise     Shares          Exercise
                                        (,000)            Price      (,000)         Price      (,000)           Price
                                    -----------------------------------------------------------------------------------
Options/warrants  outstanding
   at  beginning of period               3,363        $    4.45        900        $    8.86      4,263        $    5.38
Additions/deductions:
  Granted                                  394             8.11        280             9.35        674             8.63
  Exercised                                 16             0.83         35             1.00         51             0.95
  Cancelled                                255             5.35         30             3.25        285             5.13
                                    -----------------------------------------------------------------------------------
Options/warrants  outstanding
   at end of period                      3,486        $    4.82      1,115        $    9.38      4,601        $    5.92
                                    -----------------------------------------------------------------------------------
Options/warrants  exercisable
   at end of period                      3,486                       1,115                       4,601
                                    ===================================================================================

Weighted average fair value of
   Grants                                $4.78                       $1.63                       $3.47

Price range of  options/warrants:
   Exercised                         $0.81-$1.26                  $0.81-$1.26                  $0.81-$1.26

   Outstanding                       $0.81-$10.00                 $0.81-$11.50                 $0.81-$11.50

   Exercisable                       $0.81-$10.00                 $0.81-$11.50                 $0.81-$11.50


                                      F-17




YEAR ENDED DECEMBER 31, 2002:

                                               EMPLOYEES               NON-EMPLOYEES                   TOTAL
                                    ----------------------------    ---------------------     ------------------------
                                                        Weighted                  Weighted                     Weighted
                                                        Average                   Average                      Average
                                        Shares          Exercise     Shares       Exercise     Shares          Exercise
                                        (,000)            Price      (,000)         Price      (,000)           Price
                                    -----------------------------------------------------------------------------------
Options/warrants  outstanding
   at  beginning of period               3,009        $     4.32     1,005        $     6.73     4,014        $    4.92
Additions/deductions:
  Granted                                  432              5.26     1,045              8.12     1,477             7.28
  Exercised                                 58              1.68       800              4.72       858             4.51
  Cancelled                                 20              9.84       350             10.00       370             0.00
                                         -----        ----------     -----        ----------     -----        ---------
Options/warrants  outstanding
   at end of period                      3,363        $     4.45       900        $     8.86     4,263        $    5.38
                                         -----        ----------     -----        ----------     -----        ---------
Options/warrants  exercisable
   at end of period                      3,363                         900                       4,263
                                         =====        ==========     =====        ==========     =====        =========

Weighted average fair value of
   grants                                $4.34                       $0.84                       $1.87

Price range of  options/warrants:
   Exercised                           $0.81-$ 5.13               $1.75-$6.50                 $0.81-$6.50

   Outstanding                         $0.81-$10.00               $0.81-$11.50                $0.81-$11.50

   Exercisable                         $0.81-$10.00               $0.81-$11.50                $0.81-$11.50


The following table summarizes  information about stock options  outstanding and
stock options  exercisable,  as granted to both employees and non-employees,  at
December 31, 2004:


                                     EMPLOYEES                                 NON-EMPLOYEES
                                     ---------                                 -------------

                                     Weighted                                     Weighted
                                     Average                                      Average
                                     Remaining      Weighted                      Remaining      Weighted
  Range of            Number        Contractual     Average         Number       Contractual     Average
  Exercise          Outstanding        Life      Exercise Price  Outstanding        Life      Exercise Price
  Prices
------------------------------------------------------------------------------------------------------------
$0.81 - $2.50         1,606,000          3.2      $   1.63          35,000          6.4         $   1.00
$5.13 - $10.00        2,273,500          6.2      $   7.97         410,000          4.8         $   9.29


                      ---------                                    -------
                      3,879,500                                    445,000
                      =========                                    =======

Options and warrants  outstanding as of December 31, 2004,  2003 and 2002 expire
from June 30, 2006 through October 26, 2014, depending upon the date of grant.

NOTE 13 - DEFINED CONTRIBUTION PLANS

During 1999, the Company implemented a 401(K) defined  contribution plan for its
employees.  The Company's contribution to the plan is based on the amount of the
employee plan contributions and compensation. The Company's contribution cost to
the plan in  2004,  2003 and 2002  was  approximately  $283,000,  $201,000,  and
$179,000,  respectively. The plan was amended in October 2004 to accommodate the
participation of employees of Quigley Manufacturing Inc.


                                      F-18




NOTE 14 - INCOME TAXES

The provision (benefit) for income taxes, consists of the following:

                          Year Ended         Year Ended        Year Ended
                      December 31, 2004  December 31, 2003  December 31, 2002
                      -----------------  -----------------  -----------------

Current:
     Federal                      --                --                --
     State                        --                --                --
                           ---------         ---------         ---------
                                  --                --                --
                           ---------         ---------         ---------
Deferred:
     Federal               $ 436,353         ($660,321)        ($700,798)
     State                   129,453           (71,457)          133,544
                           ---------         ---------         ---------
                             565,806          (731,778)         (567,254)
                           ---------         ---------         ---------

Valuation allowance         (565,806)          731,778           567,254
                           ---------         ---------         ---------

Total                             --                --                --
                           =========         =========         =========

A reconciliation  of the statutory  federal income tax expense  (benefit) to the
effective tax is as follows:

                                          Year Ended           Year Ended         Year Ended
                                      December 31, 2004    December 31, 2003   December 31, 2002
                                      -----------------    -----------------   -----------------

Statutory rate                            $   153,973         $   247,834         ($1,744,916)
State taxes net of federal benefit             85,439             (47,162)             88,139
Permanent differences and other               326,394            (932,450)          1,089,523

                                      -----------------    -----------------   -----------------
                                              565,806            (731,778)           (567,254)
                                      -----------------    -----------------   -----------------

Less valuation allowance                     (565,806)            731,778             567,254
                                      -----------------    -----------------   -----------------

          Total                                    --                  --                  --
                                      =================    =================   =================

The tax effects of the primary "temporary  differences"  between values recorded
for assets and liabilities for financial  reporting purposes and values utilized
for  measurement  in  accordance  with tax  laws  giving  rise to the  Company's
deferred tax assets are as follows:

                                         Year Ended         Year Ended            Year Ended
                                     December 31, 2004   December 31, 2003    December 31, 2002
                                      -----------------    -----------------   -----------------

Net operating loss carry-forward        $ 4,758,315         $ 5,313,829         $ 4,459,068
Consulting costs                                 --                  --             380,250
Bad debt expense                            121,588             331,849             187,992
Other                                       666,857             381,802             152,788
Valuation allowance                      (5,546,760)         (6,027,480)         (5,180,098)
                                      -----------------    -----------------   -----------------
          Total                                  --                  --                  --
                                      =================    =================   =================

Certain  exercises  of options and  warrants,  and  restricted  stock issued for
services that became  unrestricted  resulted in  reductions  to taxes  currently
payable and a  corresponding  increase to  additional-paid-in-capital  for prior
years. Certain tax benefits for option and warrant exercises totaling $3,847,675
are deferred and will be credited to  additional-paid-in-capital  when  existing
net operating  losses are used.  The cumulative  tax deduction  attributable  to
options,  warrants and restricted stock is $47,456,315 which resulted in the net
operating  loss  carry-forwards  that  approximate  $12.2  million  for  federal
purposes,  of which $3.5 million will expire in 2019, $4.0 million in 2020, $4.7
million in 2022 and $14.9 million for state purposes, of which $9.7 million will
expire in 2009, $3.0 million in 2010, and $2.2 million in 2012. Until sufficient
taxable  income to offset  the  temporary  timing  differences  attributable  to
operations  and the tax  deductions  attributable  to option,  warrant and stock
activities are assured,  a valuation  allowance  equaling the total deferred tax
asset is being provided.


                                      F-19




NOTE 15 - EARNINGS PER SHARE

Basic earnings per share ("EPS")  excludes  dilution and is computed by dividing
income  available to common  stockholders  by the  weighted - average  number of
common  shares  outstanding  for the period.  Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were  exercised  or  converted  into common stock or resulted in the issuance of
common  stock  that  shared in the  earnings  of the  entity.  Diluted  EPS also
utilizes the treasury  stock method which  prescribes a theoretical  buy back of
shares from the  theoretical  proceeds of all options and  warrants  outstanding
during  the  period.  Since  there is a large  number of  options  and  warrants
outstanding,  fluctuations  in the  actual  market  price can have a variety  of
results for each period presented.

A  reconciliation  of the applicable  numerators and  denominators of the income
statement periods presented is as follows  (millions,  except earnings per share
amounts):

                             Year Ended                          Year Ended                            Year Ended
                         December 31, 2004                   December 31, 2003                     December 31, 2002
                   -----------------------------------------------------------------------------------------------------------

                  Income       Shares        EPS        Income      Shares       EPS          Loss        Shares        EPS
                   -----------------------------------------------------------------------------------------------------------

Basic EPS          $  0.5        11.5      $   0.04     $  0.7        11.5      $   0.06     ($ 5.1)        10.9      ($  0.47)

Dilutives:
Options and
Warrants               --         2.9                       --         3.4                      --           --
                   -----------------------------------------------------------------------------------------------------------
Diluted EPS        $  0.5        14.4      $   0.03     $  0.7        14.9      $   0.05     ($ 5.1)        10.9      ($  0.47)
                   ===========================================================================================================

Options and  warrants  outstanding  at  December  31,  2004,  2003 and 2002 were
4,324,500,  4,601,000 and 4,262,500,  respectively, but were not included in the
2002   computation  of  diluted  earnings  per  share  because  the  effect  was
anti-dilutive.  Stock options and warrants  with  exercise  prices above average
market price in the amount of 1,481,500,  2,155,500 and 1,683,500 shares for the
years ended December 31, 2004, 2003 and 2002, respectively, were not included in
the  computation  of diluted  earnings per share as they are  anti-dilutive.  In
addition,  stock options and warrants with exercise  prices below average market
price in the amount of 2,579,000  for the year ended  December 31, 2002 were not
included  in the  computation  of  diluted  earnings  per  share  as  they  were
anti-dilutive as a result of net losses for the period.

NOTE 16 - RELATED PARTY TRANSACTIONS

An  agreement  between the Company and the  founders  Mr. Guy J. Quigley and Mr.
Charles A. Phillips,  both officers and stockholders of the Company, was entered
into on June 1, 1995. The founders,  in  consideration of the acquisition of the
Cold-Eeze(R)  cold  therapy  product,  are to share a total  commission  of five
percent (5%), on sales collected,  less certain  deductions until the expiration
of this agreement on May 31, 2005.  For the years ended December 31, 2004,  2003
and 2002, amounts of $1,043,346, $889,340 and $692,766,  respectively, were paid
or payable under such founder's  commission  agreements.  Amounts  payable under
such  agreements  at December  31,  2004 and 2003 were  $459,583  and  $456,748,
respectively.

The Company is in the process of acquiring licenses in certain countries through
related party entities whose  stockholders  include Mr. Gary Quigley, a relative
of the Company's Chief Executive Officer.  Fees amounting to $369,000,  $369,000
and $309,493  have been paid to a related  entity  during  2004,  2003 and 2002,
respectively to assist with the regulatory aspects of obtaining such licenses.

The Company has sales brokerage and other arrangements with entities whose major
stockholders are also stockholders of The Quigley Corporation, or are related to
a major stockholder,  officer and director of the Company. Commissions and other
items  expensed under such  arrangements  for the years ended December 31, 2004,
2003 and 2002  were  zero,  zero and  $36,979,  and are  included  in sales  and
marketing,  and  administration  expense  classifications  in  the  Consolidated
Statements of Operations. There were no amounts payable under such agreements at
December 31, 2004 and 2003.

NOTE 17 - SEGMENT INFORMATION

The basis for presenting  segment  results  generally is consistent with overall
Company reporting.  The Company reports information about its operating segments
in  accordance  with  Financial  Accounting  Standard  Board  Statement No. 131,
"Disclosure  About  Segments of an Enterprise  and Related  Information,"  which
establishes  standards for  reporting  information  about a company's  operating
segments. All consolidating items are included in Corporate & Other.


                                      F-20




The Company had divided its operations into four reportable segments as follows:
The Quigley  Corporation  (Cold-Remedy),  whose main product is Cold-Eeze(R),  a
proprietary zinc gluconate  glycine lozenge for the common cold;  Darius (Health
and  Wellness),  whose  business is the sale and direct  marketing of a range of
health and wellness products;  Quigley Manufacturing  (Contract  Manufacturing),
which is the production  facility for the Cold-Eeze(R)  lozenge product and also
performs contract manufacturing services for third party customers,  and Pharma,
(Ethical  Pharmaceutical),   currently  involved  in  research  and  development
activity to develop patent applications for potential pharmaceutical products.

As discussed in Note 5 - Discontinued  Operations,  the Company  disposed of its
Sun-care and Skincare segment.

Financial  information relating to 2004, 2003 and 2002 continuing  operations by
business segment follows:

---------------------------------------------------------------------------------------------------------------------------------
AS OF AND FOR THE TWELVE
MONTHS ENDED                      Cold         Health and            Contract      Ethical         Corporate &
DECEMBER 31, 2004                Remedy        Wellness          Manufacturing  Pharmaceutical        Other            Total
---------------------------------------------------------------------------------------------------------------------------------
Revenues
  Customers-domestic          $ 22,834,249     $ 17,484,246     $    752,355               --                --      $ 41,070,850
  Customers-international               --        2,877,145               --               --                --         2,877,145
  Inter-segment                         --               --        1,975,779               --      ($ 1,975,779)               --
Segment operating profit
   (loss)                        1,618,534        1,509,001          406,811     ($ 3,056,757)         (295,602)          181,987
Depreciation                       340,828          168,696          112,824               --                --           622,348
Capital expenditures               250,246           32,569        4,388,153               --                --         4,670,968
Total assets                  $ 31,236,129     $  6,143,769     $  6,806,026               --      ($12,656,168)     $ 31,529,756


NOTE:  The stated  capital  expenditure  of  $4,388,153  related to the Contract
Manufacturing  segment  for  the  year  of 2004 is  inclusive  of an  amount  of
$4,360,829  following the  acquisition by the Company of certain assets of JoEl,
Inc., on October 1, 2004.

---------------------------------------------------------------------------------------------------------------------------------
AS OF AND FOR THE TWELVE
MONTHS ENDED                      Cold         Health and            Contract      Ethical         Corporate &
DECEMBER 31, 2003                Remedy        Wellness          Manufacturing  Pharmaceutical        Other            Total
---------------------------------------------------------------------------------------------------------------------------------

Revenues
  Customers-domestic          $20,474,969     $19,801,759                 --                 --               --      $40,276,728
  Customers-international              --       1,222,435                 --                 --               --        1,222,435
Segment operating profit
   (loss)                       1,699,378       1,791,454                 --        ($2,855,294)              --          635,538
Depreciation                      318,419         155,174                 --                 --               --          473,593
Capital expenditures              414,129         140,887                 --                 --               --          555,016
Total assets                  $24,892,338     $ 3,881,970                 --                 --      ($2,504,549)     $26,269,759

---------------------------------------------------------------------------------------------------------------------------------
AS OF AND FOR THE TWELVE
MONTHS ENDED                      Cold         Health and            Contract      Ethical         Corporate &
DECEMBER 31, 2002                Remedy        Wellness          Manufacturing  Pharmaceutical        Other            Total
---------------------------------------------------------------------------------------------------------------------------------
Revenues
  Customers-domestic          $ 14,199,833      $ 15,220,813          -                -                 -           $ 29,420,646
  Customers-international           -                 -               -                -                 -                 -
Segment operating profit
   (loss)                       (4,839,359)        1,103,610          -          ($ 1,604,753)     $     56,086        (5,284,416)
Depreciation                       262,724           124,404          -                -                 -                387,128
Capital expenditures               290,983           289,878          -                -                 -                580,861
Total assets                  $ 26,223,476      $  1,401,867          -                -           ($ 2,690,387)     $ 24,934,956


                                      F-21




NOTE 18 - QUARTERLY INFORMATION (UNAUDITED)

                                                                              QUARTER ENDED
                                                --------------------------------------------------------------
                                                  MARCH 31,         JUNE 30,       SEPTEMBER 30,  DECEMBER 31,
                                                --------------------------------------------------------------
2004
Net Sales                                       $ 9,605,617      $ 6,901,182      $ 9,690,858      $17,750,338
Gross Profit                                      4,520,243        2,776,882        3,800,112        9,277,632
Administration                                    2,750,499        2,054,741        2,313,609        2,701,099
Operating expenses                                5,320,567        3,710,062        3,856,503        7,305,750
Income (loss) from operations                      (800,324)        (933,180)         (56,391)       1,971,882
Income (loss) from continuing operations           (781,631)        (912,477)         177,376        1,969,594
Net Income (loss)                               ($  781,631)     ($  912,477)     $   177,376      $ 1,969,594

Basic EPS
   Income (loss) from continuing operations          ($0.07)          ($0.08)           $0.02            $0.17
   Net Income (loss)                                 ($0.07)          ($0.08)           $0.02            $0.17
Diluted EPS
   Income (loss) from continuing operations          ($0.07)          ($0.08)           $0.01            $0.13
     Net Income (loss)                               ($0.07)          ($0.08)           $0.01            $0.13


                                                                         QUARTER ENDED
                                                --------------------------------------------------------------
                                                   MARCH 31,        JUNE 30,      SEPTEMBER 30,   DECEMBER 31,
                                                --------------------------------------------------------------
2003
Net Sales                                       $ 8,191,092      $ 7,004,580      $ 9,912,227     $16,391,264
Gross Profit                                      3,694,110        2,765,589        4,487,847       9,063,854
Administration                                    2,441,720        2,311,887        2,046,915       3,043,324
Operating expenses                                4,616,219        3,849,747        4,372,646       6,537,250
Income (loss) from operations                      (922,109)      (1,084,158)         115,201       2,526,604
Income (loss) from continuing operations           (892,212)      (1,055,141)         134,129       2,542,147
Net Income (loss)                               ($  946,561)     ($1,055,141)     $   134,129     $ 2,542,147

Basic EPS
   Income (loss) from continuing operations          ($0.08)          ($0.09)           $0.01           $0.22
   Net Income (loss)                                 ($0.08)          ($0.09)           $0.01           $0.22
Diluted EPS
   Income (loss) from continuing operations          ($0.08)          ($0.09)           $0.01           $0.17
     Net Income (loss)                               ($0.08)          ($0.09)           $0.01           $0.17


FOURTH QUARTER SEGMENT DATA (UNAUDITED)

-------------------------------------------------------------------------------------------------------------------------
AS OF AND FOR THE THREE
MONTHS ENDED                      Cold         Health and      Contract        Ethical         Corporate &
DECEMBER 31, 2004                Remedy        Wellness      Manufacturing  Pharmaceutical        Other            Total
-------------------------------------------------------------------------------------------------------------------------
Revenues
  Customers-domestic          $12,151,638     $ 4,247,088     $   752,355          -                -           $17,151,081
  Customers-international          -              599,257          -               -                -               599,257
  Inter-segment                    -               -            1,975,779          -           ($1,975,779)          -
Segment operating profit
   (loss)                       2,491,935         187,979         406,811     ($  819,241)        (295,602)       1,971,882
Depreciation                       90,102          41,157         112,824          -                -               244,083
Capital expenditures             $130,716          $6,403     $ 4,388,153          -                  $202      $ 4,525,474

NOTE:  The stated  capital  expenditure  of  $4,388,153  related to the Contract
Manufacturing  segment  for  the  year  of 2004 is  inclusive  of an  amount  of
$4,360,829  following the  acquisition by the Company of certain assets of JoEl,
Inc., on October 1, 2004.

                                      F-22




-------------------------------------------------------------------------------------------------------------------------
AS OF AND FOR THE THREE
MONTHS ENDED                      Cold         Health and      Contract        Ethical         Corporate &
DECEMBER 31, 2003                Remedy        Wellness      Manufacturing  Pharmaceutical        Other            Total
-------------------------------------------------------------------------------------------------------------------------
Revenues
  Customers-domestic          $11,040,653      $4,825,566        -                 -                -          $15,866,219
  Customers-international          -              525,045        -                 -                -              525,045
Segment operating profit
   (loss)                       3,239,960          54,325        -              ($767,681)          -            2,526,604
Depreciation                       83,349          41,504        -                 -                -              124,853
Capital expenditures              $98,476         $46,432        -                 -                -              144,908

-------------------------------------------------------------------------------------------------------------------------
AS OF AND FOR THE THREE
MONTHS ENDED                      Cold         Health and      Contract        Ethical         Corporate &
DECEMBER 31, 2002                Remedy        Wellness      Manufacturing  Pharmaceutical        Other            Total
-------------------------------------------------------------------------------------------------------------------------
Revenues
  Customers-domestic            $6,782,664      $4,616,637          -             -                 -         $ 11,399,301
  Customers-international           -               -               -             -                 -               -
Segment operating profit
   (loss)                       (1,020,196)        172,362          -       ($   485,590)          $15,470      (1,317,954)
Depreciation                        72,091          40,811          -             -                 -              112,902
Capital expenditures               119,432         $28,921          -             -                 -             $148,353


                                      F-23




                     RESPONSIBILITY FOR FINANCIAL STATEMENTS


The management of The Quigley Corporation is responsible for the information and
representations contained in this report. Management believes that the financial
statements have been prepared in conformity with generally  accepted  accounting
principles  and that the other  information  in this annual report is consistent
with those  statements.  In preparing  the financial  statements,  management is
required to include amounts based on estimates and judgments,  which it believes
are reasonable under the circumstances.

In fulfilling its  responsibilities  for the integrity of the data presented and
to  safeguard  the  Company's  assets,  management  employs a system of internal
accounting  controls designed to provide  reasonable  assurance,  at appropriate
cost,  that  the  Company's  assets  are  protected  and that  transactions  are
appropriately  authorized,  recorded, and summarized.  This system of control is
supported by the selection of qualified personnel, by organizational assignments
that   provide   appropriate   delegation   of   authority   and   division   of
responsibilities, and by the dissemination of policies and procedures.







/s/  Guy J. Quigley                                       March 4, 2005
-------------------------------------                     -------------
Guy J. Quigley, Chairman of the Board,                        Date
  (President, Chief Executive Officer)


/s/ George J. Longo                                       March 4, 2005
--------------------------------------------------------  -------------
George J. Longo, Vice President, Chief Financial Officer      Date
    (Principal Financial and Accounting Officer)


                                      F-24




             Report of Independent Registered Public Accounting Firm


To the Board of Directors and
Stockholders of The Quigley Corporation

We have  audited  the  accompanying  consolidated  balance  sheet of The Quigley
Corporation   and   subsidiaries  as  of  December  31,  2004  and  the  related
consolidated statements of operations,  stockholders' equity, and cash flows for
the  year  ended  December  31,  2004.   These  financial   statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of the Company as of December 31,
2004,  and the  results  of its  operations  and its cash  flows for year  ended
December  31,  2004,  in  conformity  with U.S.  generally  accepted  accounting
principles.



/s/Amper, Politziner & Mattia P.C.
--------------------------------------



Edison, New Jersey
March 4, 2005


                                      F-25




             Report of Independent Registered Public Accounting Firm

To the Board of Directors and
Stockholders of The Quigley Corporation

In our opinion,  the  accompanying  consolidated  balance  sheet and the related
consolidated  statements of  operations,  stockholders'  equity,  and cash flows
present fairly, in all material respects,  the financial position of The Quigley
Corporation and its  subsidiaries at December 31, 2003, and the results of their
operations  and their cash  flows for each of the two years in the period  ended
December 31, 2003 in conformity with accounting principles generally accepted in
the United States of America.  These financial statements are the responsibility
of the  Company's  management.  Our  responsibility  is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
statements in accordance  with the  standards of the Public  Company  Accounting
Oversight  Board  (United  States).  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements,  assessing the accounting  principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.




/s/PricewaterhouseCoopers LLP
-----------------------------
PricewaterhouseCoopers LLP




Philadelphia, Pennsylvania
March 26, 2004


                                      F-26




ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE

The Company  filed a Form 8-K on July 8, 2004,  announcing  that the Company had
dismissed  PricewaterhouseCoopers  LLP  ("PwC")  as its  independent  registered
public accounting firm. On the same date, the Company engaged Amper,  Politziner
& Mattia, P.C. as independent  accountants.  The dismissal of PwC and engagement
of Amper,  Politziner & Mattia, P.C. were approved by the Audit Committee of the
Company.

The reports of PwC on the Company's financial statements for the past two fiscal
years did not contain an adverse opinion or a disclaimer of opinion and were not
qualified or modified as to  uncertainty,  audit scope or accounting  principle,
except for the 2003  fiscal year  opinion,  which  contained  a reference  for a
restatement  of  the  2002  consolidated  financial  statements  to  revise  the
accounting  for certain  warrants.  During the two most recent  fiscal years and
through  July 8,  2004,  there were no  disagreements  with PwC on any matter of
accounting principles or practices,  financial statement disclosure, or auditing
scope or procedure, which disagreements,  if not resolved to the satisfaction of
PwC,  would have caused them to make reference to the subject matter of any such
disagreement in connection with its reports on the financial statements for such
years.  During the two most recent fiscal years and through July 8, 2004,  there
were no reportable  events (as defined in Item  304(a)(1)(v) of Regulation S-K).
The Company has not consulted with Amper,  Politziner & Mattia,  P.C. during
the last fiscal year ended  December  31, 2003 or during the  subsequent interim
periods from January 1, 2004  through and  including  July 8, 2004 on either the
application  of  accounting  principles  to  a  specified  transaction,   either
completed  or proposed,  or the type of audit  opinion that might be rendered on
the Company's consolidated financial statements.

ITEM 9A.    CONTROLS AND PROCEDURES

Based on their  evaluation,  as of the end of the period covered by this report,
the Company's Chief Executive Officer and Chief Financial Officer have concluded
the Company's disclosure controls and procedures (as defined in Rules 13a-14 and
15d-14 under the Securities Exchange Act of 1934) are effective. There have been
no  significant  changes in  internal  controls or in other  factors  that could
significantly  affect these controls subsequent to the date of their evaluation,
including any  corrective  actions with regard to significant  deficiencies  and
material weaknesses.

ITEM 9B.    OTHER INFORMATION

None

                                    PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The  information  required under this item is  incorporated  by reference to the
Company's Proxy Statement for the 2005 Annual Meeting of Stockholders.

ITEM 11.    EXECUTIVE COMPENSATION

The  information  required under this item is  incorporated  by reference to the
Company's Proxy Statement for the 2005 Annual Meeting of Stockholders.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
            AND RELATED STOCKHOLDER MATTERS

The  information  required under this item is  incorporated  by reference to the
Company's Proxy Statement for the 2005 Annual Meeting of Stockholders.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The  information  required under this item is  incorporated  by reference to the
Company's Proxy Statement for the 2005 Annual Meeting of Stockholders.


                                      -24-




ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

The  information  required under this item is  incorporated  by reference to the
Company's Proxy Statement for the 2005 Annual Meeting of Stockholders.


                                     PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits:
            3.1     Articles  of  Incorporation  of  the  Company,  as  amended,
                    (incorporated  by reference to Exhibit 3.1 of Form  10-KSB/A
                    filed on April 4, 1997).

            3.2     By-laws of the Company as currently in effect  (incorporated
                    by reference to Exhibit 3.2 of Form 10-KSB/A  filed on April
                    4, 1997 and Exhibit 99.3 of the Company's  Current Report on
                    Form 8-K filed on September 21, 1998).

            4.1     Specimen Common Stock Certificate (incorporated by reference
                    to Exhibit 4.1 of Form 10-KSB/A filed on April 4, 1997).

            10.1*   1997 Stock Option Plan (incorporated by reference to Exhibit
                    10.1 of the  Company's  Registration  Statement  on Form S-8
                    (File No. 333-61313) filed on August 13, 1998).

            10.2    Exclusive  Representation  and Distribution  Agreement dated
                    May 4, 1992  between the  Company  and  Godfrey  Science and
                    Design,  Inc. et al  (incorporated  by  reference to Exhibit
                    10.2 of Form 10-KSB/A filed on April 4, 1997).

            10.3*   Employment  Agreement dated June 1, 1995 between the Company
                    and Guy J.  Quigley  (incorporated  by  reference to Exhibit
                    10.3 of Form 10-KSB/A filed on April 4, 1997).

            10.4*   Employment  Agreement dated June 1, 1995 between the Company
                    and  Charles  A.  Phillips  (incorporated  by  reference  to
                    Exhibit 10.4 of Form 10-KSB/A filed on April 4, 1997).

            10.5    United States  Exclusive  Supply  Agreement  dated March 17,
                    1997  (Portions  of this  exhibit are omitted and were filed
                    separately with the Securities  Exchange Commission pursuant
                    to  the  Company's   application   requesting   confidential
                    treatment  in  accordance  with Rule 406 of  Regulation C as
                    promulgated  under the Securities Act of 1933,  incorporated
                    by reference  to Exhibit  10.5 of Form SB-2 dated  September
                    29, 1997). See exhibit 10.14.

            10.6    Consulting  Agreement  dated May 4, 1992 between the Company
                    and Godfrey Science and Design, Inc. et al. (incorporated by
                    reference to Exhibit 10.5 of Form 10-KSB/A filed on April 4,
                    1997).

            10.7*   Employment  Agreement  dated  November 5, 1996,  as amended,
                    between  the Company  and George J. Longo  (incorporated  by
                    reference to Exhibit 10.10 of Form 10-KSB filed on March 30,
                    1998.

            10.8    Rights  Agreement  dated  September  15,  1998  between  the
                    Company  and  American  Stock  Transfer  and  Trust  Company
                    (incorporated  by  reference  to Exhibit 1 to the  Company's
                    Registration  Statement on Form 8-A filed on  September  18,
                    1998).

            10.9    Consulting agreement dated March 7, 2002 between the Company
                    and Forrester  Financial LLC  (incorporated  by reference to
                    Exhibit 99.1 of Form 8-K filed on April 11, 2002).


                                      -25-




            10.10   Warrant  agreement  dated March 7, 2002  between the Company
                    and Forrester  Financial LLC  (incorporated  by reference to
                    Exhibit 99.2 of Form 8-K filed on April 11, 2002).

            10.11   Agreement  dated  February  2, 2003  between the Company and
                    Forrester   Financial  LLC  (incorporated  by  reference  to
                    Exhibit 99.3 of Form 8-K filed on February 18, 2003).

            10.12   Amended and Restated  Warrant  Agreement  dated  February 2,
                    2003  between  the  Company  and  Forrester   Financial  LLC
                    (incorporated by reference to Exhibit 99.4 of Form 8-K filed
                    on February 18, 2003).

            10.13   Share  agreement  effective  as of December 31, 2002 between
                    the Company and Suncoast  Naturals,  Inc.  (incorporated  by
                    reference  to Exhibit  2.1 of Form 8-K filed on  February 6,
                    2003).

            10.14   Third Amendment to United States  Exclusive Supply Agreement
                    (incorporated  by  reference  to Exhibit  10.18 of Form 10-K
                    filed on April 1, 2004).

            10.15   Asset Purchase and Sale  Agreement  dated August 18, 2004 by
                    and between  JoEl,  Inc.  and the Company  (incorporated  by
                    reference  to  Exhibit  10.1 of Form 8-K filed on August 20,
                    2004).

            10.16   Addendum  dated  October 1, 2004 by and  between the Company
                    and JoEl,  Inc.  to the asset  purchase  and sale  agreement
                    dated August 18, 2004  (incorporated by reference to Exhibit
                    10.1 of Form 8-K filed on October 7, 2004).

            10.17   Term  Note  dated  October  1,  2004 in the  amount  of $3.0
                    million  executed  by the  Company  in  favor  of PNC  Bank,
                    National  Association  (incorporated by reference to Exhibit
                    10.2 of Form 8-K filed on October 7, 2004).

            10.18   Open-End  Mortgage and Security  Agreement  dated October 1,
                    2004 on  real  property  located  in  Lebanon,  Pennsylvania
                    executed by Quigley Manufacturing Inc. in favor of PNC Bank,
                    National  Association  (incorporated by reference to Exhibit
                    10.3 of Form 8-K filed on October 7, 2004).

            10.19   Open-End  Mortgage and Security  Agreement  dated October 1,
                    2004 on real property located in Elizabethtown, Pennsylvania
                    executed by Quigley Manufacturing Inc. in favor of PNC Bank,
                    National  Association  (incorporated by reference to Exhibit
                    10.4 of Form 8-K filed on October 7, 2004).

            10.20   Registration  Rights  Agreement dated October 1, 2004 by and
                    among the Company  and the  shareholders  signatory  thereto
                    (incorporated by reference to Exhibit 10.5 of Form 8-K filed
                    on October 7, 2004).

            10.21*  Employment  Agreement  dated October 1, 2004 between Quigley
                    Manufacturing  Inc.  and  David  B.  Deck  (incorporated  by
                    reference  to  Exhibit  10.6 of Form 8-K filed on October 7,
                    2004).

            10.22*  Employment  Agreement  dated October 1, 2004 between Quigley
                    Manufacturing Inc. and David Hess (incorporated by reference
                    to Exhibit 10.7 of Form 8-K filed on October 7, 2004).

            14.1    Code of Ethics  (incorporated  by reference to Exhibit II of
                    the  Proxy  Statement  on  Schedule  14A  filed on March 31,
                    2003).

            16.1**  PricewaterhouseCoopers LLP letter dated March 30, 2005.

            21.1**  Subsidiaries of The Quigley Corporation.

            23.1*   Consent   of    PricewaterhouseCoopers    LLP,   Independent
                    Registered Public Accounting Firm, dated March 30, 2005.

            23.2**  Consent  of  Amper,  Politziner  &  Mattia,  Independent
                    Registered Public Accounting Firm, dated March 30, 2005.

            31.1**  Certification of Chief Executive Officer pursuant to Section
                    302 of the Sarbanes-Oxley Act of 2002.




                                      -26-




           31.2**   Certification of Chief Financial Officer pursuant to Section
                    302 of the Sarbanes-Oxley Act of 2002.

           32.1**   Certification  of Chief  Executive  Officer  pursuant  to 18
                    U.S.C.  1350,  as adopted  pursuant  to  Section  906 of the
                    Sarbanes-Oxley Act of 2002.

           32.2**   Certification  of Chief  Financial  Officer  pursuant  to 18
                    U.S.C.  1350,  as adopted  pursuant  to  Section  906 of the
                    Sarbanes-Oxley Act of 2002.

                    * Indicates a management  contract or  compensatory  plan or
                      arrangement

                    **Filed herewith


                                      -27-




                                   Signatures


Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                                              THE QUIGLEY CORPORATION


/s/  Guy J. Quigley                                         March 31, 2005
--------------------------------------------------          --------------
Guy J. Quigley, Chairman of the Board, President,                Date
Chief Executive Officer and Director


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following  persons on behalf of the registrant and in the
capacities and on the dates indicated:


Signature                                     Title                                      Date
---------                                     -----                                      -----


/s/ Guy J. Quigley                            Chairman of the Board, President,          March 31, 2005
-------------------------------------         Chief Executive Officer and Director       --------------
Guy J. Quigley

/s/ Charles A. Phillips                       Executive Vice President, Chief Operating  March 31, 2005
-------------------------------------         Officer and Director                       --------------
Charles A. Phillips

/s/ George J. Longo                           Vice President, Chief Financial            March 31, 2005
-------------------------------------         Officer and Director (Principal            --------------
George J. Longo                               Financial and Accounting Officer)

/s/ Jacqueline F. Lewis                       Director                                   March 31, 2005
-------------------------------------                                                    --------------
Jacqueline F. Lewis

/s/ Rounsevelle W. Schaum                     Director                                   March 31, 2005
-------------------------------------                                                    --------------
Rounsevelle W. Schaum

/s/ Stephen W. Wouch                          Director                                   March 31, 2005
-------------------------------------                                                    --------------
Stephen W. Wouch

/s/ Terence O. Tormey                         Director                                   March 31, 2005
-------------------------------------                                                    --------------
Terence O. Tormey

                                      -28-`